The Earth Does Revolve Around the Sun
Professors of Finance
Western Kentucky University
March 23, 2010
In his continued evolution as an investment writer dedicated to passive investing, Larry has recently started a well-received blog on CBS’ MoneyWatch.com called Wise Investing. Each post is a very quick read focused on a narrow topic — again, data driven. If you read Swedroe’s many books (he’s written nine and co-authored several others) and keep up with his blog, you will be as grounded and up-to-date in passive investing principles as anyone can be.
Finally, we would be remiss if we didn’t mention two other writers who, while not specifically focused on the indexing approach to investing, both write about investing using the passive approach as a starting point. Jason Zweig, who writes a regular column in the Wall Street Journal, has written several good books about investing and personal finance. His latest, dealing with the writings of legendary Benjamin Graham, comes out this spring. And Rick Ferri has written several books, but three that we regularly use as a resource are All About Index Funds, All About Asset Allocation, and The ETF Book. Any investment professional, whether they subscribe to the passive approach or not, should have these three Ferri books on his or her shelf — they are authoritative and great sources of information.
There are on-line forums dedicated to the passive investing approach to which anyone (passive investor or not) can post or simply read what others are discussing. There is the Morningstar-based Bogleheads Unite forum (formerly called Vanguard Diehards) and the independent Bogleheads.org forum. There are lots of lively arguments on these discussion boards as active and passive investors mix it up!
The passive vs. active debate has been ongoing for a very long time. The foundation for the theoretical superiority of passive over active approach was laid out very effectively by William Sharpe almost two decades ago in a simple, yet powerful paper. Much of the literature since has focused on getting the investing public to accept that it is, indeed, the Earth that revolves around the Sun and not vice-versa! This is not an easy task. Much of active management can be associated with a first-rate skill set, exceptional training, superior work ethic, and a viciously competitive spirit. It isn’t easy for a typical investor to accept that active management (with those characteristics) isn’t the route to take for statistically superior portfolio performance. Thus, the authors mentioned in this article have to be applauded for doing a remarkable job of using easy-to-relate to data to ‘speak’ to their readers about why passive investing is the only reasonable route to realization of one’s financial dreams and goals.
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