Wall Street Secret #714: Why Active Investing Underperforms

Money Tree Investing

Money Tree Investing Podcast

Stockmarket, Valuestocks, Investing, Finance, Passiveincome, Wealth, Business, Personalfinance

4.6 • 658 Ratings

🗓️ 9 June 2023

⏱️ 72 minutes

🔗️ Recording | iTunes | RSS

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Summary

Have you noticed that Active investing tends to underperform?

This is one of those non-secret secrets. What is not typically known is why this is the case. Most people claim it is due to fees, but this is not true. Fees only contribute to part of the tracking error. This week's Wall Street Secret dives into why this happens and what you can do to prevent it in your portfolio.

For more information, visit the show notes at https://moneytreepodcast.com/active-investing-underperforms-timothy-baker

Today's Panelists:

Kirk Chisholm | Innovative Wealth
Barbara Friedberg | Barbara Friedberg Personal Finance
Megan Gorman | The Wealth Intersection

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Transcript

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0:00.0	Welcome to the Money Tree Investing Podcast.
0:04.0	Stock market, wealth, personal finance, value stocks, invest in your life.
0:10.0	Hello, Smart Money Tree Podcasts listeners. Welcome to this week's show. My name is Kirk Chisholm and I'll be your host.
0:16.0	So today we're joined with Tim Baker. How you doing today, Tim?
0:20.0	Good morning, Kirk. I'm doing well. Thanks. How are you? Great. Well, glad to have you with us. So we're joined with Tim Baker. How are you doing today, Tim? Good morning, Kirk.
0:21.3	I'm doing well.
0:21.6	Thanks.
0:22.0	How are you?
0:22.7	Great.
0:23.8	Well, glad to have you with us.
0:26.1	So we're going to be talking about some really fun topics today.
0:28.6	So, Tim, tell us a little bit of your background before we begin.
0:32.5	I started metric financial back in July of 2018.
0:39.2	So we're going to celebrate our five-year anniversary this year. That was after working for a number of the bigger firms. I started out with Solomon Smith Barney slash city group. And really, you know,
0:44.7	everything that we're about now, which is lower fees and and using exchange traded funds over
0:50.1	mutual funds, all of that came from my time at BlackRock where I was a smart beta
0:54.4	strategist for their I shares group. And in 2018, you know, I went off on my own and this was
1:01.6	the mission, help educate people about the kinds of things we're going to talk about this morning.
1:06.9	Yeah, there's a bunch of things we want to get to. Let's talk a little bit about, you know,
1:10.8	the big one, which is ETFs and mutual funds first. And then we can kind of get into what's going on. Today's next, well, every day is an exciting day in the markets. But today the CPI came out. So we can talk about that in a little bit? Let's talk about ETFs. Can you explain to the listeners? What are ETFs and how are they different for mutual funds?
1:27.8	And let's just dive right in there.
1:29.5	So an exchange traded fund, as the name would imply, trades on an exchange, as opposed to a
	...

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