Robert Lloyd, CFA
Indexers Win Again
AMC Drama Is Exposing Risks in $11 Trillion World of Indexing (yahoo.com)
Great Article. WRONG Conclusion.
The rapid rise of AMC and Gamestop in the small cap universe does NOT invalidate index investing strategies. Rather, for those active managers that did NOT mirror the Reddit traders, they dramatically underperformed as the Small Cap benchmarks' positive performance were driven up by these two names. Expect lots of active managers to have bad news this year. Indexes win again.
One of the key reasons active managers are unable to beat their benchmarks is the large effect moonshots have on benchmark performance. When a small company goes up 1000%, it’s bound to impact the broad benchmark. If you are an active manager who didn’t own it, well, you just underperformed by a measurable amount.
Robert Lloyds, CFA®
Chief Investment Officer
Lloyds Intrepid Wealth Management
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