I'm an active investor

I have posted here many times about the benefits of index investing over active investing, yet I still invest some of my money in active investments. It’s only about 15% of my total portfolio.

I know the odds are against me because after the high costs of active investing, active investments only beat passive investments one third of the time. But I want a chance to be one of the outperformers.

I am telling you this as I hate when I see passive indexers attacking active investors for their strategy. In the forums I visit, they are dominated by proponents of low cost, passively managed index funds. And for good reason. They perform better most of the time.

This is why I have 85% of my portfolio in index funds. Well diversified, low cost, and better odds of better returns. But I still have an itch I want to scratch. You may say there’s a cream for that.

But the itch I am referring to is one where I select a basket of companies that I think will outperform the index. Because it is only 15% of my portfolio I am not too perturbed if they lose 50% or more in value. Because I know that is the price I have to pay for less diversification. But I am willing to take the chance for better returns for this small portion of my portfolio.

I would never have 100% of my portfolio in active management. The numbers and odds don’t stack up. But I am more than happy to have a little play on the side.

Some people are fine with 100% in index investments. Personally, I need something a bit different.

Some people are fine with 100% in active investments. Personally, I am far too risk averse for that.

Others are somewhere in between the two.

The point is there are all kinds of investors out there, with different reasons for investing, different tolerances for risk, and different end goals. So be nice with other and don’t be so judgmental. You know what works for you. Don’t be so quick to knock something that works for someone else.

As long as everyone knows the potential risks of their strategy and have coping strategies in place, then all credit to you. You do you. Scratch your itch.


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