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Passive investing: Straight to video

Many people would benefit from knowing more about passive investing. But not many of those people are prepared to read about why it’s usually a superior strategy to active management.

No, not even when the articles are as delightful as those stored up by my co-blogger The Accumulator in his passive investing guide.

Indeed, a good argument as to why active funds remain so popular despite the evidence that most fail to beat index funds is that active funds are much better at marketing. The devil has all the best tunes, they say!

But what about a movie about passive investing? Surely even your most disinterested friends and family might be persuaded to spend an hour watching pretty pictures explain why passive investing is the best way to build their long term wealth?

Passive investing: The Youtube movie

Okay, so there’s no chance of a 54-minute Youtube video being sexier than Gordon Gecko’s dodgy dealings in Wall Street, but it might just be more profitable.

Grab some coffee, a significant other and/or a bag of popcorn and enjoy!

Well, what did you make of it? I think the film does a pretty good job of laying out the basics. The overall production quality is excellent.

And so many A-list stars of the index fund world!

Of course we were slightly miffed we didn’t get a call to the casting couch here at Monevator. (It’s a UK production, after all).

True, our anonymity clause would have got in the way. But then again we might have been presented as shadows cast upon on a wall, with our words of wisdom dubbed with unlikely, rough-sounding accents. It would have given an underground ‘smash the establishment’ vibe to proceedings.

Actually, that’s not a bad idea. Perhaps we’ll shoot our own art house movie!

Please share your passive investing film reviews in the comments below.

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{ 10 comments… add one }
  • 1 OldPro December 14, 2012, 7:05 pm

    I didn’t get the call either… and I could be mistaken for Mr Jack Bogle on a dark night… Well I’ve never been one for ‘being passive’ granted!!

    Interesting video… sign of the times…?

  • 2 ermine December 15, 2012, 12:21 am

    I find it surprising that so many in the UK apparently invest(ed?) via active funds in the first place. I’ve never held an active fund in my life, though I admit to being tempted by Woodford’s fund.

    What’s in it for financial advisers, anyway? You open your trading or ISA account, buy a bit every month, sit back, no need to pay anyone else 😉

  • 3 The Investor December 15, 2012, 10:43 am

    @ermine — The UK retail investor overwhelmingly invests in active funds. Remember that a lot will be through pensions and similar.

    @OldPro — It’s probably an arms race. The passive guys now have this video, so the active guys will hire Ant and Dec to shoot their own active investing reality TV show or similar! 🙁

  • 4 William December 15, 2012, 11:06 am

    Thank you for a real gem of a video – I forwarded for my 21 year old stepson. I have to say that I have now held the Vanguard Lifestrategy 6o% Accumulation for a year now in my HL SIPP and its up around 11%+. It has performed well at minimal cost. If I manage to remain disciplined I can see that it will deliver for me.
    Finally, just want to wish all at Monevator (and followers) a merry Christmas and prosperous New Year.

  • 5 Paul S December 15, 2012, 11:11 am

    All good stuff but I thought it was rather weak on the effect of high fees. It keep stressing that low fees are good but made no effort at quantifying the effect so I am not sure it really got the message across. A few graphs might have helped.

  • 6 Sensible Investing December 15, 2012, 2:50 pm

    Monevator – we would LOVE to feature you in some of our future video productions. Anonymity guaranteed – just get in touch with us at info@sensibleinvesting.tv.

    Thanks for the comments. We’re really pleased with the reaction the video’s receiving on both sides of the Atlantic. Please keep an eye on the website – there are plenty of videos up there (including more content on high charges, Paul S) and plenty more to come…

  • 7 Moneyman December 15, 2012, 3:19 pm

    Nice video, particularly to see some of the great names in economics/investing talking to camera. No quibbles with the overall message: keep costs to a minimum and diversify. Avoid funds with high charges. Low cost index funds give you an average performance.

    Three issues. First: it may not be as easy as it looks – you need to be diversified across different asset classes but there are potentially a lot of these: how do you find which are suitable for you?

    Second: diversifying risk means also diversifying (lowering) returns. Do you just want to float up and down with tides of the market or do you want a return that keeps ahead of inflation?

    Third issue: Looking at a 2012 total returns approaching 32% on my portfolio (described on my website) I have to accept that this is in large part due to luck – being invested in the ‘right’ asset sub-classes for this particular year (in my case, slightly risky UK financials, mainly). But if I look at the passive options that reflect this asset allocation – their returns don’t come near.

  • 8 ivanopinion December 16, 2012, 6:16 pm

    I am a big fan of passive investment and I liked the video, as long as you understand that it is a one-sided advocacy piece, not a balanced review. Perhaps not surprising given that it was paid for by a financial adviser company who only recommend passive funds: Barnett Ravenscroft Wealth Management.

    For instance, the video suggests that there is no analysis to support active management other than selectively pointing to particular funds that happen to have done well. Admittedly, a lot of active management supporters resort to these arguments, which are indeed tosh, but if you are prepared to spend a bit of time reading academic papers then there is some decent evidence to support the benefits of truly active management (as opposed to closet trackers). eg, How Active Is Your Fund Manager? A New Measure That Predicts Performance, by Cremers and Petajisto (http://rfs.oxfordjournals.org/content/22/9/3329.full.pdf?keytype=ref&ijkey=M0noS3O1M6QvzdG), or the CRA study for the FSA: http://www.fsa.gov.uk/pubs/other/pastperf_mutalfunds.pdf

    On balance, I tend to favour passive investment, because I think it is a much more practical solution for me and for most investors, but the key word is balance. The decision isn’t as clear cut as this video would have you believe.

    Having said that, I do have some sympathy with the approach of the video, because very few of the people who they are aiming the video at will have the patience to take the time to understand a proper analysis.

  • 9 emanon August 8, 2013, 11:15 am

    About to dig into this in a minute, but i wanted to ask one question.

    If you ‘passively’ dreep feed monthly deposits into a fund (a fund that seems to beat the FTSE 100) but that very fund is obviously an active fund i.e. not a index tracker of any sort. Are you still classed as a passive investor??

    i look forward to your reply

  • 10 The Investor August 8, 2013, 3:52 pm

    @emanon — I think there’s a semantic issue there. You’re more market ‘agnostic’ I think. “Passive” once used to mean any kind of non-traded investment style, but nowadays it tends to mean index-tracking.

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