Not sure about passive investing. Does it mean investing in one particular index of your choosing and not devoting much time, if any, to individual stock selection? Or does it mean investing in several indices (S&P/small cap/value/foreign/etc.) and not much time for individual stock selection?
As I understand it, Mr. Buffett, in his will, has advised his wife to invest primarily in the S&P 500? At this point, with the S&P at record highs, that seems to me could either be dangerous if the person was striving to increase portfolio worth (i.e. not Mrs. Buffett), or might require a multi-year commitment (if the S&P declines and then eventually recovers).
It also seems to me that a decision to invest in two or more indices is an active decision where one must acknowledge that he/she will have years where one index excels and other years where a different index does. (And at some point the rebalance or not issue is an active decision.) With this, I presume the person believes the overall returns may not beat any index but otoh that the risk of loss may be reduced (by holding different indices) and the overall portfolio increases over time. An achievable goal here would be to have a portfolio that will grow enough to meet the person's financial goals -- if, as the article, says, people would focus on setting a financial goal and meeting it, and not on short-term performance of stocks or an index.
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"Only 29 percent of investors defined investing success as reaching their long-term goals; most preferred short-term markers, like their portfolio’s return versus that of a benchmark.
Another disconnect revolves around time. Investors want to invest with a long time horizon yet react to short-term swings that derail the strategy. Think of investment return markers, like one, three and five years — hardly the time needed to get people from their first job to retirement." |
