We've got a new update for you.
We've gotten a lot of questions, especially regarding active fund managers and why it helps having your investments managed by humans instead of passively investing.
There has been some news recently that Michael Burry, the guy from The Big Short, and other large asset managers are starting to ring the alarm bells regarding passive investing.
Remember, Round's managers are all active fund managers and experts in their fields.
Jeff Gundlach, of DoubleLine (a large fund manager), has warned that passive investing has reached a mania status.
This mania has caused saturation in specific areas of the markets, and continues to get worse as most robo advisors and many financial advisors only allocate their clients to passive ETFs.
If this herd sells their passive ETFs during a recession, it can cause sharp price declines and a serious liquidity problem.
Even if these ETF providers fire sell assets, they may still be unable to meet everyone’s redemptions in a timely manner.
There can be a scenario where the Federal Reserve has to get involved and bail them out.
Given some of these risks built up in passive ETFs, it’s a great time to appreciate the merits of active investing that the fund managers on Round provide you with.
Also, if you have any topics you want us to dive deeper into, reach out to us! We have a snazzy new video team helping us create more of these videos.
See you soon.
Statements made by Round are of Round’s opinion. The information provided should not be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation or particular needs of any specific person. Diversification does not ensure a profit or protect against a loss in a declining market. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Forecasts or projections of investment outcomes in investment plans are estimates only, based upon numerous assumptions about future capital markets returns and economic factors. As estimates, they are imprecise and hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Investing entails risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.
Reference to a bubble in passive investing is in reference to the Bloomberg article, “The Big Short’s Michael Burry Explains Why Index Funds Are Like Subprime CDOs” by reporter Reed Stevenson, and CNBC article, "Jeffrey Gundlach says passive investing has reached a ‘mania’ – investors should avoid index funds" by reporter Michael Sheetz.