Investment Advisory Team
A hot debate among investors today is whether index mutual funds are superior to actively managed funds. However, in many ways this debate misses the point in terms of what determines investor success.
A pioneering academic study by Gary Brinson in 1986 demonstrated that asset allocation is by far the most important factor influencing a portfolios returns. Put another way, having the right overall mix of stocks and bonds is far more important than owning the right individual securities. 1
However, even the optimal asset allocation won’t ensure success if investors don’t have the discipline to stick with it through market ups and downs.
Accordingly, we believe investor discipline is the essential ingredient to success. And while the debate over index funds versus active management will surely continue, it is of little consequence to investors who don’t stick with their financial plan and proper asset allocation and diversification.
Source: Hefren-Tillotson, Morningstar, Bloomberg; as of 3/31/2017 ; Past performance does not predict future results.
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