http://sensibleinvesting.tv -- the independent voice of passive investing In the final part of our documentary Burton Malkiel, renowned economist and author of A Random Walk Down Wall Street, explains how the principles of passive investing have held firm over the past three decades. The film also shows how fund managers are kidding themselves and their customers when they declare they can beat the market on a regular basis. Featuring Weston Wellington, Rick Ferri, Jasmine Birtles and Richard Wood, Presented by Robin Powell. For more information contact info@sensibleinvesting.tv. So, to summarise... Passive investing has grown steadily in popularity in the United States since the 1970s and continues to do so. Passive already accounts for more than 30% of the institutional investment market in the UK. And increasingly, both financial advisers and indepedent experts, are starting to recommend it to individual investors. In 1973, an American economist named Burton Malkiel wrote a book that's become a classic... A Random Walk Down Wall Street. Although he backed it all up with detailed statistics, charts and studies, Malkiel's argument is a simple one... You can't predict share prices. If you manage to beat the market, it'll be down to luck. Even then, transaction costs will likely cancel out any extra returns you make. As for picking the next star fund manager, you might as well forget it. To quote the author himself, "a blindfolded chimpanzee throwing darts at the stock pages could select stocks as well as the experts". In the intervening 30 years, the fund management industry has poured scorn on Malkiel's theory. But no one yet has managed to disprove it. Now in his 70s, very wealthy, and with a Nobel Prize to his name, Malkiel is more convinced than ever before that passive investing is the rational choice for every investor. In fact, despite there being a wealth of evidence in favour of passive investing, produced by some of the world's most distinguished economists and statisticians, the intellectual case for active investing has been almost non-existent. Active's most vehement supporters are fund managers themselves - i.e. those who earn a very comfortable living from it. One former active manager who converted to passive suspects there are many active managers who privately admit that passive makes much more sense. And what does Warren Buffett, the word's most successful active manager, say about passive investing? "Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees." Of course, the passive approach doesn't guarantee big returns - no matter how long your timescale. But even in turbulent economic times such as these, a balanced, passively managed portfolio - carefully weighted to match your own emotional tolerance of risk - does guaranteed something even more valuable than that - peace of mind. You may have noticed that we've deliberately avoided singling out specific fund management companies for blame. As long as you read the small print, you can see for yourself how much each company charges. And it's easy enough to find out whether they really do deliver the returns they say they can. But we did ask the Financial Services Authority - the industry regulator - for an interview. This was its reponse. Unfortunately we will have to decline your request to participate in the programme. The FSA has strict rules about being seen to endorse a particular firm and (that) will prevent us participating. Indeed this film has been funded by a company that specialises in passive investining. But, given all the adverting for actively managed funds that we're constantly bombarded with - also privately funded, fof course, using customers' money - you could say it's about time that someone redressed the balance. So you've heard the main reasons why we think the fund management industry is letting investors down, and why a passive investment portfolio is the right solution for the vast majority of investors. But don't take our word for it. Why not investigate further? It won't take long. Nor will cot you much - if anything at all. But, financially at least, it might just be the best investment you'll ever make. For more videos like this one, visit http://sensibleinvesting.tv
Visibility: 3041
Duration: 8m 8s
Rating: 12