Active vs Passive: Use SPIVA scorecards to make better decisions

About This Episode

Over the last couple of episodes, we’ve been exploring different aspects of index-based investing from the principles of evidence-based investing and how you can apply those principles to your portfolio, to the history of the indexing revolution.

Today, we’re taking a deep dive into the numbers by looking at the annual SPIVA reports which compare the performance of actively managed strategies versus indices all around the world – active vs passive investing.

This is where our advocacy for index-based investing is rooted – in the data which shows that indexing offers a consistently better opportunity for you to meet your future financial goals.

On this episode, Ruben and I talk about what the data says about investing with active managers versus indices. We break down where you can find reports on these statistics, which metrics are measured, what those numbers mean for you as an investor, why you’re better off investing in asset classes rather than managers, how our model differs from other advisors, and so much more!

Thank you for listening!

Key Topics:

• What we can learn from the SPIVA reports (2:01)
• Lessons from rugby about the advantages of objective scorekeeping (3:04)
• The markets which are represented in SPIVA reports (5:45)
• Key performance results from the SPIVA reports (6:35)
• The areas being measured in these scorecards (8:04)
• Active managers’ average performance against the benchmarks (9:08)
• Why active managers don’t necessarily have an advantage in a bear market (10:38)
• How active managers performed during the 2008 economic crisis (12:43)
• Refuting the idea that indexing only works for large-company stocks (13:54)
• Why people think they can pick winning investment strategies (17:07)
• What the data shows about the long-term performance of top-ranking active managers (18:58)
• My experience as a bond trader selecting mutual funds in the early 90s (20:06)
• The pricing issue when buying into a top-performing fund (21:19)
• Why active funds tend to underperform (21:59)
• The reasons why some investors are still choosing active managers (24:25)
• How our model differs from other managers (25:14)
• Why I believe we’re reaching a tipping point in Canada (26:06)
• But what about Warren Buffett? (27:10)
• Our key takeaways that will benefit you as an empowered investor (28:38)