Will indexing always be the best?

Indexing is often promoted as the best strategy, primarily for those who may not have a consistent edge in the market. Here are key insights from experts on the topic:

1. Lack of Consistent Edge: André Perold explains that most people lack an edge in investing most of the time, hence indexing is a wise option for them as it ensures they at least keep up with the market without incurring high costs from frequent trading and management fees1.

2. Consistent Performance: Rodney Comegys mentions that indexed funds often outperform actively managed funds over the long term due to their low costs and efficient market tracking, making them dependable in various market conditions2.

3. Access and Technology: Over time, the equity market has become very efficient with the proliferation of information and technology, making it harder for individual investors to consistently beat the market. This makes the case for indexing even stronger3.

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     1

     Indexing Insights

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     2

     Indexing vs. Active Investing

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     3

     Equal Playing Field

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     4

     Indexing Private Markets

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4. Active Management Challenges: While acknowledging this, Michael Mauboussin points out that in markets with high explicit indexing, active managers might outperform by strategizing differently and reducing fees, but this doesn't negate the general effectiveness of indexing4.

Overall, while indexing is not the best strategy in every specific situation, such as for investors with unique insights or expertise, it’s generally highly effective and favored, especially for those looking for a reliable and low-cost approach to investing.