2018 Fourth Quarter Commentary

Passive funds invest broadly across the market, holding a portfolio of securities regardless of their prices — passive investing is much like going to the supermarket and buying everything in the store, as opposed to choosing your items carefully.

Active investing is a curated collection, an active choice to buy a stock, for example, and avoid another.

You do this in life all the time.  One doesn’t marry every person you meet.  While you might have a collection of partners, hopefully love also means you can be carefully prudent with whom to match and, at least at the time of the wedding, you feel you made a good choice, all things considered.

If you go to college, you don’t attend every available college.  You attend the one, two or the few you select.  You take care, perhaps do some research, and then act on your insights.

No different in investing, active investing is making positive choices to allocate wealth to a select few investments.  Via this wealth, perhaps your buying boosted the stock price or lowered an interest rate paid on debt, a company’s management puts your money to work.

It’s up to us to decide where to invest wealth —  whether or not we choose to decide, we make choices even by default.

Passive funds have been gathering an increasing share of investors yet their portfolios look so much the same.  To passive investors, value doesn’t matter, buy or sell.  They buy whatever the entire market has to offer.

We active investors make informed judgments based on value and price.  As the carpenter’s saying goes, we measure twice and cut once.