“We’ve long felt that the only value of stock forecasters is to make fortune tellers look good.” This classic quote from Warren Buffett encapsulates the guiding principle of passive investors, who prosper not by trying to do better than the stock market, but by mimicking it at a low cost. These investors are often proponents of index funds and ETFs (exchange-traded funds), which are “portfolios that match or track the components of a market index, such as the Standard & Poor’s 500 Index (S&P 500).”1 Active investors are those who try to beat the performance of the overall stock market by selecting stocks (or other investments, such as bonds, real estate or precious metals) whose value will grow faster than …
