5th Smart Investing Day - Aiming at the false target
In recent years capital has increasingly flown from actively managed funds to passive products, such as exchange trade funds (ETFs) or index funds. The advantages of passive investing are obvious: It is simple, fees are low and there is no risk of tracking errors against the capital weighted market index as benchmark. The disadvantages are less well known: Capital weighting leads to a market average. There are more efficient portfolios with less risk and higher returns than the index portfolios.
Are investors caught in a market average trap?