Session 35 (of 42): The Case for Passive Investing – Active Investors’ Track Record
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In this session, we make the argument for passive investing by looking at the performance of active investors. We begin by looking at individual investors and note that they collectively under perform the market and that the under performance gets worse as they get more active. There is some cause for hope, though, since the very best investors do substantially out perform the market, especially if they stick to the companies that they know and don’t diversify too much. With mutual funds, the evidence is not favorable, since mutual funds under perform indices and the under performance cuts across all classes of mutual funds. Collectively, active investing does not seem to provide much of a payoff. Playlist for class (Intro + 42 sessions): https://youtube.com/playlist?list=PLUkh9m2BorqnZGADa8cTzeJblmrZY_SqP&si=zI2pk17pJeld4nWR Slides: https://www.stern.nyu.edu/~adamodar/pdfiles/invphilslides25/session35.pdf Post-class test: https://www.stern.nyu.edu/~adamodar/pdfiles/invphilcertificate/postclass/session35test.pdf Post-class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/invphilcertificate/postclass/session35soln.pdf
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