Fisher Investments CEO Recommends Passive Investing [emoji16]

[RetiredAt49]

Ken Fisher, founder of one of the largest wealth management companies, just released a YouTube video where he recommends passive investing - specifically investing in low cost index funds…

I just about passed out because as a former client, Fisher Investments had me invested in over 80+ individual stocks, which I spent all of last year unwinding and re-investing in VOO and VTI. They are self proclaimed “experts” in active investing yet their CEO is now saying active investing is a bad idea and that everyone should pursue passive investing [emoji23][emoji23][emoji23]

Here’s the video: https://youtu.be/vJ3iDYNZCvk

 

[Hank]

The only expertise this guy has is marketing and promotiing his firm. He's been plastering web ads and video content all ofver the web for years.

 

[FREE866]

Ken Fisher, founder of one of the largest wealth management companies, just released a YouTube video where he recommends passive investing - specifically investing in low cost index funds…

I just about passed out because as a former client, Fisher Investments had me invested in over 80+ individual stocks, which I spent all of last year unwinding and re-investing in VOO and VTI. They are self proclaimed “experts” in active investing yet their CEO is now saying active investing is a bad idea and that everyone should pursue passive investing [emoji23][emoji23][emoji23]

Here’s the video: https://youtu.be/vJ3iDYNZCvk

That isn't how I interpreted that video at all. His point is that passive investing is an excellent idea, but unfortunately , due to emotions, most people can't do it. I think he's right.

 

[RetiredAt49]

That isn't how I interpreted that video at all. His point is that passive investing is an excellent idea, but unfortunately , due to emotions, most people can't do it. I think he's right.

While that might have been a major point of his video, his company is based on the foundation that active investing is needed (and really it’s the only reason his company exists)

 

[Hank]

He is right though, that people can't help fiddling with their investments. But I would bet that on this website there are many who were actually able to buy and hold and re-balance without going off the rails. Personally, I'm glad that doing nothing is considered a positive and noteworthy attribute.

 

[audreyh1]

That isn't how I interpreted that video at all. His point is that passive investing is an excellent idea, but unfortunately , due to emotions, most people can't do it. I think he's right.

That’s a good point.

I’m glad it doesn’t apply to me and I don’t have to depend on the Ken Fisher’s of the world to manage our investments.

 

[RobbieB]

Yup.

I know 2 guys that are still working because they sold their stock low back in 2008.

I remember the presentation by the Company that was doing our 401K's. Guy was just pleading "don't sell, now is the time to buy more" and that's what I did and that's why I'm retired -

 

[OverThinkMuch]

Ken Fisher's commentary doesn't match his data. He introduces a slide around the three minute mark which shows "Hypothetical growth of $1,000,000 invested 25 years, 12/31/1996 - 12/31/2021" and then shows $10.25M for investors in theory, and $6.06M for investors in practice.

First, Portfolio Visualizer shows similar results for 1997-2021, $10.29M in theory, which they call 9.77% CAGR. 1.0977 ^ 25 = 10.282, very close to both $10.3M amounts. So the data for the S&P 500 in his video matches portfolio visualizer, but his claim of "8.3%" return doesn't match his data or portfolio visualizer.
https://www.portfoliovisualizer.com/backtest-asset-class-allocation

I experimented and found 7.5% for 25 years gives $6.10M, very close to the $6.06M from the slide. Mr Fisher claims the return was "3.2%", but that would have turned $1M into $2.2M ... which isn't the amount he listed on the slide. Undercutting his central argument, the gap between passive investors and the index is closer to 2.3%, or less than half what he claimed. In practice, passive investors earned 7.5%, not "3.2%", or more than twice what he claimed.

 

[unclemick]

That isn't how I interpreted that video at all. His point is that passive investing is an excellent idea, but unfortunately , due to emotions, most people can't do it. I think he's right.

Yeh you rite!! Passive investing has been my 'Big Dog on the Porch' starting with 'Bogle's Folly' circa 1977 to the Target Retirement series.

However - I have ?experimented? over the decades since 1966 - raw land, timberland, rental RE, gold, silver, platinum coins, penny stocks, dividend stocks, etc.

Even today I have ' a few good stocks.' with leftover RMD money.

Heh heh heh - Passive index bailed me out (auto investing in 401k) while I was busy being a genius(not) with my mad money.

 

[Montecfo]

Ken Fisher's commentary doesn't match his data. He introduces a slide around the three minute mark which shows "Hypothetical growth of $1,000,000 invested 25 years, 12/31/1996 - 12/31/2021" and then shows $10.25M for investors in theory, and $6.06M for investors in practice.

First, Portfolio Visualizer shows similar results for 1997-2021, $10.29M in theory, which they call 9.77% CAGR. 1.0977 ^ 25 = 10.282, very close to both $10.3M amounts. So the data for the S&P 500 in his video matches portfolio visualizer, but his claim of "8.3%" return doesn't match his data or portfolio visualizer.
https://www.portfoliovisualizer.com/backtest-asset-class-allocation

I experimented and found 7.5% for 25 years gives $6.10M, very close to the $6.06M from the slide. Mr Fisher claims the return was "3.2%", but that would have turned $1M into $2.2M ... which isn't the amount he listed on the slide. Undercutting his central argument, the gap between passive investors and the index is closer to 2.3%, or less than half what he claimed. In practice, passive investors earned 7.5%, not "3.2%", or more than twice what he claimed.

ok, but I think his point is a good one, that individual investors zig zag in and out of positions at exactly the wrong times on average, and thus do not achieve market returns. This has been shown to be true over long periods. And we see it here, with people abruptly deciding to sell stocks or dramatically reduce allocation. Emotions again.

I have no need for professional money management, but I though his stock picks were valuable when he had a Forbes column.

 

[youbet]

That isn't how I interpreted that video at all. His point is that passive investing is an excellent idea, but unfortunately , due to emotions, most people can't do it. I think he's right.

+1

 

[OverThinkMuch]

I have no need for professional money management, but I though his stock picks were valuable when he had a Forbes column.

The name of the video matches the name of his book, Debunked, which I read years ago. He had a lot of original views and insights in that book. I read it when I invested passively, and found it valuable and interesting.

 

[ERD50]

Does he include his fees in his alternative to passive investing? How do his after-fees returns compare to the 'average investor'?

That isn't how I interpreted that video at all. His point is that passive investing is an excellent idea, but unfortunately , due to emotions, most people can't do it. I think he's right.

But I don't think the 'solution' is to turn your money over and lose 1% (or whatever) to fees every year. That takes a big hit too.

Using portfolio analyzer, as OverThinkMuch shows, the number for the passive market is $10.29M. Subtract a 1% annual fee, and you are at $8.00M. Not that much better than his 'average investor'. So educate that investor, and even if not perfect, they'd probably meet/beat the FA and their fees.

I think the solution is education - if people really understood the advantage of passive investing, and what those ups/downs really mean (buying opportunities in the accumulation phase), they'd be much, much more likely to do it correctly. They could always join this forum for free, and get hundreds of people in a virtual support group to hold their hands in a downturn.

-ERD50

 

[audreyh1]

I just know Fisher must have a massive advertising/marketing budget.

 

[FREE866]

Does he include his fees in his alternative to passive investing? How do his after-fees returns compare to the 'average investor'?



But I don't think the 'solution' is to turn your money over and lose 1% (or whatever) to fees every year. That takes a big hit too.

Using portfolio analyzer, as OverThinkMuch shows, the number for the passive market is $10.29M. Subtract a 1% annual fee, and you are at $8.00M. Not that much better than his 'average investor'. So educate that investor, and even if not perfect, they'd probably meet/beat the FA and their fees.

I think the solution is education - if people really understood the advantage of passive investing, and what those ups/downs really mean (buying opportunities in the accumulation phase), they'd be much, much more likely to do it correctly. They could always join this forum for free, and get hundreds of people in a virtual support group to hold their hands in a downturn.

-ERD50

I agree with pretty much every thing you said. My sense is most people that invest try to " beat the market" and chase heat, react to headlines, sell when down, etc So paying someone 1%+ would probably do more to help than hurt so just hiring someone is a better strategy. I don't really know.



I'm just grateful I've developed an extremely strict discipline over the last couple of decades to just always stay the course with ETF's. The road is bumpy at times but the numbers are undeniable. And thats even considering the last two decades have been less than historical averages.

 

[FREE866]

I think the solution is education - if people really understood the advantage of passive investing, and what those ups/downs really mean (buying opportunities in the accumulation phase), they'd be much, much more likely to do it correctly. They could always join this forum for free, and get hundreds of people in a virtual support group to hold their hands in a downturn.

-ERD50

I think its really an emotional issue though. There have been studies that show that losses affect people negatively psychologically much greater than the positive feeling of seeing gains. And "doing nothing" when times are hard is just too much for many people, especially when it comes to money, which is such a sensitive issue. Honestly , I often think of this quote--"All of humanity's problems stem from man's inability to sit quietly in a room alone," wrote the French philosopher Blaise Pascal.


Rant over

 

[ERD50]

I think its really an emotional issue though. There have been studies that show that losses affect people negatively psychologically much greater than the positive feeling of seeing gains. And "doing nothing" when times are hard is just too much for many people, especially when it comes to money, which is such a sensitive issue. Honestly , I often think of this quote--"All of humanity's problems stem from man's inability to sit quietly in a room alone," wrote the French philosopher Blaise Pascal.


Rant over

Sure, but that doesn't mean that those people couldn't learn about the downsides of that emotional response, and learn to curb it.

If that weren't possible, no one could ever give up smoking, drinking, amphetamines, sniffing glue, etc. (not so subtle "Airplane" reference).

-ERD50

 

[FREE866]

Sure, but that doesn't mean that those people couldn't learn about the downsides of that emotional response, and learn to curb it.

If that weren't possible, no one could ever give up smoking, drinking, amphetamines, sniffing glue, etc. (not so subtle "Airplane" reference).

-ERD50

Fair point...you also forgot gambling, shopping, sex , and internet addiction haha

 

[RetiredAt49]

Does he include his fees in his alternative to passive investing? How do his after-fees returns compare to the 'average investor'?



-ERD50

As a former client of Fisher Investments and OP, they charge 1.25% (assets under management model). They had me in 80-90 individual stocks. They do not “passively” invest as they were always swapping assets around. The two years I was with them, my portfolio lagged the S&P 500 buy 3-5 percentage points. Just prior to leaving them, I had received their past performance “secret document” and looked at their annualized returns for the past 20 some years and they underperformed the S&P 500 although some years they did better but not over their 20+ period.

 

[FREE866]

As a former client of Fisher Investments and OP, they charge 1.25% (assets under management model). They had me in 80-90 individual stocks. They do not “passively” invest as they were always swapping assets around. The two years I was with them, my portfolio lagged the S&P 500 buy 3-5 percentage points. Just prior to leaving them, I had received their past performance “secret document” and looked at their annualized returns for the past 20 some years and they underperformed the S&P 500 although some years they did better but not over their 20+ period.

Interesting.....


He doesn't claim that his firm passively invests....so you lagged the S and P....what did they say the benchmark you should compare your portfolio to? and what % stock were you?
curious

 

[RetiredAt49]

Interesting.....


He doesn't claim that his firm passively invests....so you lagged the S and P....what did they say the benchmark you should compare your portfolio to? and what % stock were you?
curious

The benchmark they use is the MSCI world index. They were/are adamant that everyone be in 100% equities regardless of their age/situation. I was fine with that AA because I’m only 50 and I agree with the math/research

 

[target2019]

Here is a view of FI from across the pond: Fisher Investments Review https://www.yodelar.com/insights/fisher-investments-review

In another review there is a section called "How Fisher Investments invests your money" https://www.magnifymoney.com/investing/ria/fisher-investments/

Between the lines of the mumbo jumbo, you can see there isn't a conventional benchmark. Maybe that has changed, maybe not.

 

[FREE866]

The benchmark they use is the MSCI world index. They were/are adamant that everyone be in 100% equities regardless of their age/situation. I was fine with that AA because I’m only 50 and I agree with the math/research

And how did the portfolio do compared to MSCI?

 

[audreyh1]

I think the solution is education - if people really understood the advantage of passive investing, and what those ups/downs really mean (buying opportunities in the accumulation phase), they'd be much, much more likely to do it correctly. They could always join this forum for free, and get hundreds of people in a virtual support group to hold their hands in a downturn.

-ERD50

Education - it still won’t work for a lot of people. Humans are not 100% rational beings. It takes a lot to balance against fear/greed FOMO and outright panic. Not to mention a family member freaking out.

We see it here all the time. And this is a fairly educated forum.

I personally picked an overall minimal hands-on strategy to shield myself from short-term emotional reactions. And it took a lot of self-motivated education and life experience and soul-searching to get there. I’m not convinced most people can do this. The tinker instinct is super strong even when things seem to be going well.

 

[FREE866]

Education - it still won’t work for a lot of people. Humans are not 100% rational beings. It takes a lot to balance against fear/greed FOMO and outright panic. Not to mention a family member freaking out.

We see it here all the time. And this is a fairly educated forum.

I personally picked an overall minimal hands-on strategy to shield myself from short-term emotional reactions. And it took a lot of self-motivated education and life experience and soul-searching to get there. I’m not convinced most people can do this. The tinker instinct is super strong even when things seem to be going well.

Totally.....and I think now, in terms of investing, with the 24/7 news , social media frenetic environment it is even harder to put on blinders, have a plan and stick with it.