Archive | August, 2011

Why Passive Investors Aren’t Really Lazy

A couple of weeks ago, Balance Junkie wrote a post called Why This Is No Market for Couch Potatoes. The main argument of the post—one that has been made many times before—is that passive investing is fine during bull markets, but it likely won’t work going forward because “we are in a secular bear market that began in 2000.”

This argument picks up on a previous post, where Balance Junkie referred to passive investors as ostriches who ignore macroeconomic conditions when they invest: “Sticking your fingers in your ears and singing while the markets tank is not a good investing strategy.”

This is a gross mischaracterization of passive investing, but I have to accept part of the blame. Balance Junkie referred to a recent column in MoneySense where I described the strategy as “the investing equivalent of flopping in front of the TV with a bag of Cheetos.” I realize now that there’s a problem with the terminology used by passive investors. Couch Potato, Sleepy, Lazy, Easy Chair, Gone Fishin’,

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