TO at the end of the 1980s, the Wall Street Journal attempted an unprecedented experiment: comparing the performance of portfolios of professional managers to those of baskets made up of securities chosen at random. And, against all odds, they did not stand out for seconds in this evaluation exercise.
Since then, the test has been repeated with various methods: names of actions put on a target and selected by sending darts, or even sorted by… chimpanzees. With always the same conclusion: specialists do not do better than chance or ape-like intelligence.
Today, other, more sophisticated studies show that very few actively managed funds by professionals manage to beat the overall market in the long term. Clearly, despite their anticipation, their analysis, their stock selection, these managers do not manage to exceed the major stock market indices such as the Parisian CAC 40 or the New York Dow Jones.
On the strength of this observation, funds which exactly replicate the course of stock market indices were created in the United States in the early 1990s. These financial products, called “ETF” (“exchange-traded funds”), quickly became successful, and they appeared on this side of the Atlantic about ten years later.
Today, this so-called “passive” management continues to develop throughout the world. With good reason. These index funds, despite the barbaric names with which they are given (ETF, or even trackers), have indisputable advantages: their upward or downward trend is easy to understand, they are easy to buy or sell and, above all, the costs associated with the use of these funds are reduced.
Risk allergy
However, until now, and unlike American savers, the French have shunned ETFs. First, because financial intermediaries no doubt preferred to highlight products that are more loaded with costs, then because these funds benefit from stock market jumps, but cannot resist their fall. What to cool our allergic compatriots at the slightest risk.
This is the great theoretical advantage of actively managed funds: when they anticipate a decline in certain assets, managers can modify their investments to reduce their exposure. In practice, very few of them manage to fully benefit from the increases and avoid the market upsets. For individuals who want to diversify part of their savings on the stock market, ETFs therefore remain a simple and inexpensive solution. But no question of going headlong. The file that we publish will allow you to make the right choices.