A Popular Investing Strategy Carries RisksOver the past 15 years, the most powerful trend in investing has been the growth of passive investing, which is the long-term purchase of investment vehicles whose performance is linked to a relatively fixed set of investment instruments, such as a stock index. The appeal of passive investment has not been limited to individual investors but has been embraced by pension funds and other institutional investors. Unfortunately, it is this extreme popularity that may produce the conditions that could expose devotees of passive investing to the risk of significant losses in the years ahead.The popularity of passive investment is understandable. Passive investment vehicles typically offer lower fees and the ability to quickly gain diversified exposure to a market or specific sector. Passive strategies are easy to implement and are intellectually undemanding. That 80% of actively managed mutual funds have historically not performed as well as broad market indices have certainly contributed to the appeal of passive investment vehicles. Passive investment strategies now represent almost 50% of invested assets versus roughly 10% at the turn of the century.But there are dangers\u2026\u2026.It is noteworthy that the bulk of the growth of this pool of passive investors has occurred in a benign market environment. Except for the Financial Crisis of 2008, and the sharp but brief market decline of 2020, this growth has coincided with consistently positive market returns generated by unusually low market volatility. Thus, the experience of most owners of passive investment vehicles has been a steady march higher, with minimal volatility. Indeed, stock markets for the decade of the 2010s demonstrated extremely low volatility compared with historical averages.The ease of use of passive vehicles has reduced the desire by many people to acquire the investment knowledge obtained by study and experience. Passive investment has thus\u2026<\/p>","protected":false},"excerpt":{"rendered":"
A Popular Investing Strategy Carries RisksOver the past 15 years, the most powerful trend in investing has been the growth of passive investing, which is the [\u2026]<\/span><\/p>","protected":false},"author":0,"featured_media":2796,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[35],"tags":[],"_links":{"self":[{"href":"https:\/\/afluxcoin.com\/fr\/wp-json\/wp\/v2\/posts\/4688"}],"collection":[{"href":"https:\/\/afluxcoin.com\/fr\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/afluxcoin.com\/fr\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/afluxcoin.com\/fr\/wp-json\/wp\/v2\/comments?post=4688"}],"version-history":[{"count":0,"href":"https:\/\/afluxcoin.com\/fr\/wp-json\/wp\/v2\/posts\/4688\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/afluxcoin.com\/fr\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/afluxcoin.com\/fr\/wp-json\/wp\/v2\/media?parent=4688"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/afluxcoin.com\/fr\/wp-json\/wp\/v2\/categories?post=4688"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/afluxcoin.com\/fr\/wp-json\/wp\/v2\/tags?post=4688"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}