The Benefits of Active Management
How active investment management can help you hit long-term goals with fewer hiccups.
What are the benefits of active management? Quality active advice can eclipse active management fees over time by helping investors stay disciplined. Quality active management can help all of us as investors avoid bad investment decisions by helping us commit to a disciplined, long-term investment strategy. A disciplined investment strategy is incredibly important. While investment returns can be hurt by fees or unscrupulous advisors, far more often, investment returns are hurt by our own behavior as investors.
Now, there's nothing inherently wrong with passive investing—if an investor can figure out how to do it and how to stick to it over time. The simple point is: The vast majority of investors simply can't be passive investors. DALBAR, an independent research group, reviews investor returns and investor behavior each year, looking back at investor returns and market returns on a rolling 25-year basis. They have found through the years that the average mutual fund investor only holds funds an average of three and a half years, including index funds. Shorter holding periods are evidence of active decisions not being passive.
In addition, DALBAR studies consistently show equity fund investors and bond fund investors underperforming their market returns over those periods—and often by wide margins. Not being disciplined and not having a long-term strategy hurt passive investors and show the benefit of getting advice from a disciplined, active investment advisor like Fisher Investments.
