One of the many features of the stocks in Young Research’s Retirement Compounders portfolio (RCs), is their dividend paying histories. Pair the RCs with a solid fixed-income investment, and you’re on your way to being a world class investor. At MarketWatch, investing legend John Bogle echoes the call for defensive investing.
One development could mitigate much of the advantage that index funds enjoy and slow the rush to own them, but you’re probably not going to like it. When the market suffers a prolonged decline, active managers can gain an edge over indexers by moving large portions of assets into cash or into defensive sectors such as utilities and consumer staples.
Shareholders of index funds could then suffer more than owners of actively managed funds, and they could take their losses harder due to the perceived security they feel precisely because they merely own the market and aren’t trying to beat it. That might make active investors feel a bit of schadenfreude for indexers who have been free-riding at their expense, but the feeling probably wouldn’t last. The greater price swings that could ensue in a heavily indexed, less-active market are likely to exacerbate losses for everyone.
