Passive: Less aggressive?

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Weekly Digest

Warren Buffett described Jack Bogle, the founder of Vanguard who died last week, as the man who had the largest impact on investors’ wealth yet charged nothing for it. Bogle’s vision was simple: by definition, the average active manager must produce a lower return than whole of market net of fees. This principle, and the low fees that typically accompany index investing, spurred a trend that started in the mid 1970s and continues apace today. This law of average returns is crucial to the whole motivation behind passive investing, but there comes a tipping point when the active opportunity becomes compelling.