Styles

What this video covers

• Why an active manager charging 1.5% must outperform a passive fund by 1.4% annually just to break even, and why most active funds still underperform after fees
• How high turnover in active management creates short-term capital gains and lower tax efficiency, versus the buy-and-hold tax efficiency of passive strategies
• What the efficient market hypothesis (EMH) implies for each style: active management assumes market inefficiency, passive management assumes efficiency
• How to distinguish growth stocks (high price-to-earnings, or P/E, high price-to-book, low dividends, volatile) from value stocks (low P/E, low price-to-book, higher dividends, mean reversion)
• Which style outperforms in which economic environment: value in recessions and recoveries, growth in bull markets and expansions
• Why a retiree needing current cash flow belongs in an income strategy with bonds, real estate investment trusts (REITs), and dividend-paying utilities
• The three portfolio killers in income strategies: interest rate risk, inflation risk, and dividend cut risk