- Passive investing always beats actively-managed strategies,
investing icon Burton Malkiel said in a Wednesday television
- ‘The evidence is that active is getting worse relative to
indexing,’ the Princeton economics professor and best-selling
author said on Bloomberg TV.
- Despite Vanguard founder Jack Bogle’s worries about index
investing getting too large, Malkiel said the strategy could be 90%
of the market and not cause problems.
Investing icon Burton Malkiel is doubling down on his argument
for passive investing.
The Princeton economics professor, who has long championed index
investing, reiterated in a recent television interview that
investors have better performance from funds tied to indexes than
they do from picking individual stocks.
“I cannot think of one” situation in which active beats
passive, Malkiel said on Bloomberg TV on Wednesday.
Malkiel is famous for a vivid metaphor in “A Random Walk Down
Wall Street,” in which he wrote that “a blindfolded monkey
throwing darts at a newspaper’s financial pages could select a
portfolio that would do just as well as carefully selected by
Now, “I believe in it more than ever,” he said, citing Standard
& Poor’s research that over 15 years, 90% of active managers
are outperformed by the S&P 500 index. “The evidence is that
active is getting worse relative to indexing.”
“One of the things I’m pleased about is the evidence just gets
stronger and stronger,” Malkiel said. “It’s not that nobody
outperforms, but it’s like looking for a needle in a haystack, and
I say more than ever, buy the haystack instead.”
Even though asset managers make less on fees for passive
products than they do for active products, Malkiel said he is not
concerned with profitability.
“I’m not worried about the industry. The industry will do fine,”
he said. “There are plenty of other ways of making money.”
He also countered one of Vanguard founder Jack Bogle’s
assertions in his
new book that the growth of indexing could hurt corporate
governance by concentrating stock ownership in a few passive
managers’ funds. Bogle noted that US index mutual funds have grown
from 4.5% of the US stock market value in 2002 to more than 17%
“When people ask me is there too much indexing, I say there
still isn’t enough indexing,” Malkiel said.
The professor – who spent 28 years as a member of Vanguard’s
board of directors – said index investing could be 90% of the
market “and there would still be more than enough active managers
to make the market efficient.” He called concerns around
concentration “one of the least worries” for financial