A passive approach to investments could be hazardous as the indices ignore many factors such as foreign and fiscal policy, according to Ariel Investments.
The company’s chief investment officer, international and global equities, Rupal J. Bhansali stressed that active investing tended to “do better in choppy markets.”
She also said that Trump’s agenda included a few factors which were being ignored by the indices, presenting greater risks for passive investors and greater opportunities for high conviction active managers.
“I think passive has become a very crowded trade of late,” she said.
“Chasing what is in vogue has never been a successful recipe for securing long-term returns but instead often proves to be a precursor to large losses or underperformance.
“Passive investors may find they have been penny wise and pound foolish by unduly focusing on low costs at the expense of higher risks.”
