'They’re in for a shock': Best-selling author James Rickards explains how 'parasite' passive investors will make the next market downturn 'like a runaway train with no brakes'
Best-selling author James Rickards rips into passive investors, referring to them as"parasites" and"free riders."
For the uninitiated, passive investing is a simple strategy where the objective is to invest in low-fee index funds that are aimed at mimicking a broader benchmark, such as the, Nasdaq, or Russell 2000. Once a purchase is made, it's held long-term to minimize the transaction costs associated with buying and selling.
This take is at odds with the majority of the investment community. In fact, Warren Buffett famously responded to an inquiry about how hishis estate with the following comment:"Put 10% of the cash in short-term government bonds and 90 percent in a very low-cost S&P 500 index fund. " "The danger of this situation lies in the fact that active investors are the ones who prop up the market when it's under stress," he stated."If markets are soaring in a bubble fashion, active investors may take profits and step to the sidelines. Either way, it's the active investors who act as a brake on runaway behavior to the upside or downside."
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