There is a timeless debate within the investment management field of whether long term performance is better with active investment management, where proactive and careful security level investment choices are being made, or passive investment management with the focus on maintaining a broadly diversified portfolio with the lowest possible cost.
I personally believe that some excess return can be created by paying for access to high quality active investment managers, even net of the additional costs and fees. However, the arguments supporting passive portfolio management, with a focus on high diversification and low fees and expenses, are also quite compelling. In reality, the majority of portfolio performance is explained by broad asset allocation over the individual security selection. The performance difference between active and passive investing is small enough that one should not hold strongly to one position over the other, because both approaches can lead investors to success. The more important thing is to be invested in a diversified way for a long period of time. For most families it is far more important to have access to high quality and comprehensive wealth planning.
In my practice clients can now choose between active management, using high quality investment managers, or passive management with a portfolio of ETFs, each with an appropriate fee structure that provides the same wealth management support with either choice.
