Carl Richards at the fine Behavior Gap blog recently brought up The Question That May Not Be Asked: Is Passive Investing a bad idea?
Juicy Excerpt: In most of these discussions, many of the arguments that people make seemed to be informed by a fundamental belief in the efficient market hypothesis or modern portfolio theory…. I’m not saying that the efficient market theory is incorrect, that modern portfolio is dead, or that indexing/passive investing is the wrong way to invest. I am simply saying that…we ought to take the time to question the underlying assumptions. We must understand the underlying assumptions, then question and judge them against what really happened and make a decision for ourselves.
The Personal Finance Blogosphere needs to learn that this questioning the underlying assumptions business stuff can be dangerous. There are certain individuals amongst us who will jump on an opportunity like that to play Clark Kent and ask some mild-mannered-reporter-type questions.
Juicy Excerpt: I have brought this matter before a good number of big name “experts” (John Bogle, William Bernstein, Bill Bengin, Jonathan Clements, Larry Swedroe, Rich Ferri, Scott Burns, Micheal Kitces, Bill Schultheis). Not one has been able to give convincing responses to perfectly reasonable questions…. Today’s investing advice is not serious. It’s marketing-driven, not research-driven (the research that is employed is there to serve marketing purposes). Rob Arnott said it well when he observed that most of today’s conventional investing advice is the product of “myth and urban legend.” There is no “there” there.
In all seriousness, Carl done good. I encourage my fellow money bloggers to find out what brand of cornflakes he is eating and endeavor to give us more of the same. It has been my experience that asking a question is often a key step that must be taken by those with a serious interest in eventually learning the answer to the question.
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