A Different Take On Passive Vs. Active

My investment strategy is simple, I buy few index ETFs and hold them forever. Happy with market returns, I forgo any attempts at outperformance. I've written a fair amount about my liking for a low-effort, low-fee, passive strategy. Despite this, I am not at all against active investing.

You can be very successful picking the right investments. I know those who've made a lot doing so. I also know those who've lost a lot. These groups are not mutually exclusive.

Active investing is hard, and it very well should be. If everyone could do it, all profits would vanish. Only a few outliners will ever do well. This applies across all fields. Only a few players will make it to the NBA, even fewer will win a ring. Only a few authors will get a publishing deal, even fewer will make the best-sellers list. It takes a lot of effort (plus some luck) to become elite. If you're able to rise above, tremendous fortunes await.

With great rewards come great risk. The risk of wasted effort, forgoing opportunities, and losing it all.

Risk is why I invest like I do. I have a long enough time horizon and a modest enough lifestyle to achieve my goals without being an amazing investor. I can afford NOT to take these risks, so why do it? I can focus my efforts and take risks in other areas.

So unlike die-hard passive investors, I think it is indeed very possible to beat the market. It's just comes with risks, fortunately risks that I don't need to take.

Comments

The Art of Giving Feedback

Constructive feedback is an awkward affair. You don't want hurt feelings, but recognize the importance of honesty. You've tried the classic "hoping things will get better on its own" and unfortunately it hasn't played out. When giving feedback, here are a few things that I try to keep it mind. Start with empathy. Step into their shoes and understand their story. If you don't know, ask. Be genuinely curious. Feedback is a dynamic affair. Shared communication with a shared goal towards progress. Take the emotion out of it. Focus on the situation, not the person. Focusing on the person adds unnecessary weight to an already emotionally-bloated event. Be specific. Give clear examples. Vague feedback equals dismissed feedback. Doing above won't de-awkward things fully, but it will dampen it and increase the chance of better outcomes.

Bias For Clarity

Bias for action. Gets things done. Go-getter. Traits companies big and small look for. And for good reason, you're being hired to do things! However, action is a secondary step that often overshadows the primary step, direction. Clear direction is the foundation that enables our actions to takeoff. Without it, we're stuck in the mud. Striving for clarity is an underrated skill. Having the courage to ask ( seemingly ) obvious questions, and to check in, making sure we're all on the same page. "O bvious " questions are a low risk, high reward way to add value. At worst, you'll add confidence to our actions. At best, you discover a misalignment that saves us from a dead-end. The more people, the more clear we need to be. The bigger the initiative, the bigger the risk of reaching the finish line, only to realize expectations were off. Success is always uncertain. But we can be certain about what we want and what everyone's job is. Things that can be clea

Negative Feedback, Positive Lessons

In the battle against plastic bags, a five-cent tax was shown to be much more successful at deterring usage than a five-cent credit for bringing your own bags. Carrots satisfy but sticks sting, and they sting hard. So we default to the less painful choice of avoiding loss. Loss aversion impacts the way we process information. A 2019 study invited participants to learn through a series of multiple choice questions. Each question only had two options to choose from. Whether guessing correctly or not, they would still learn the right answer. Despite the identical learning opportunity, participants were much more successful at recalling the answers they guessed correctly than those they got wrong. "You're right!" feels good. We savour the moment, analyzing every detail. "You're wrong!" stings. We want to quickly forget, dismiss, and move on. When we succumb to loss aversion, we miss opportunities to learn. Failure is part of the process. We'll experie

Herman Ye

Search