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PASSING ON PASSIVE INVESTING: Lance Roberts on Why You Must Get Active with Your Money
Just stick your money into an index fund and you’ll retire comfortably: that’s the cliché we hear from money managers and old-school investing commentators all the time. That might have been true at one time in history, but can we continue to count on the stock market to deliver us a comfortable retirement?
We get this question all the time from our readers and listeners, so we Wealth Research Group put the question to Lance Roberts, the Chief Investment Strategist and Economist for RIA Advisors, a portfolio management firm which manages investment accounts for individuals, as well as for wealth strategies hub RealInvestmentAdvice.com.
Lance also hosts a podcast known as The Lance Roberts Show, which can be accessed through the Real Investment Advice website. Through this podcast, Lance digs into the raw data to bring a unique perspective to the conversation. His deep understanding of economics, markets and how investing really works, helps listeners their goals.
After having been in the investing world for more than 25 years from private banking and investment management to private and venture capital, Lance Roberts has pretty much “been there and done that” in practically every area of finance at one point or another. His common-sense approach has appealed to audiences for over a decade, and Lance’s audience continues to grow each and every week.
Courtesy: Lance Roberts
Lance’s investment strategies and knowledge have been featured on Fox 26, CNBC, Fox Business News, and Fox News. He has been quoted by a litany of publications from The Wall Street Journal, Reuters, and The Washington Post all the way to TheStreet.com as well as on several of the nation’s biggest financial blogs, such as The Pragmatic Capitalist, ZeroHedge, and Seeking Alpha.
Wealth Research Group asked Mr. Roberts about the validity of passive index-fund long-term investing in today’s economic environment. According to Lance Roberts, the problem with the standard S&P 500 buy-and-hold strategy is that it doesn’t take into account the impact that inflation will have on the money you’re earning through the years.
93% Of Investors Generate Annual Returns, Which Barely Beat Inflation.
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Sure, the value of your portfolio might slowly go up over time, but after adjusting for inflation, the math shows that you’ll need much more capital growth than an index fund will likely provide if you want to have enough money to retire comfortably.
Plus, it’s not as easy to ride out the stock market as you might think. Here’s the simple reality of the situation, according to Lance Roberts: the average investor who had money in a stock market index in the year 2000 didn’t get back to break-even until 2013. That’s 13 years of your 30 years to save for retirement completely gone – nearly half of your time to save for retirement has been lost.
Courtesy: Lance Roberts
But you don’t have to be a victim to this suboptimal investing strategy. Active management, according to Lance Roberts, can help you to preserve your capital during downturns – and it doesn’t require you to beat the market every year on the upside.
In fact, according to Lance Roberts, with active capital management you can underperform a stock market index by 50% on the upside and still beat the index over time if you know how to avoid the big losses. It’s a great lesson to learn for investors, as it’s the key to outperforming old-school passive strategies that can’t thrive in times of portfolio-deteriorating inflation.
It all makes perfect sense when Mr. Roberts explains it, and there’s a lot to gain from Wealth Research Group’s highly informative interview with Lance Roberts. You’ll also learn a great deal about finance and investing when you visit RealInvestmentAdvice.com and The Lance Roberts Show.
To continue your education even further, you’re welcome to download Wealth Research Group’s wide-ranging array of top-notch reports. These include our full report on The 5 Essential Steps to Financial Independence, our Become Wealthy: Straight from Billionaires guide with a step-by-step process to attain permanent wealth, and my Personal Treasure Trove of Wealth-Generating Stock Picks so you can generate consistent returns in your own portfolio.
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