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Surveys provide insights on how financial planners, Gen X view active, passive
June 26, 2024
Two recent surveys provide insights on how financial planners and Gen X investors are thinking about the balance between active and passive investing.
Approximately three-quarters of financial advisers believe that a blend of active and passive investing provides that best overall investment performance, according to the 2024 Trends in Investing survey. The survey, which was conducted by the Journal of Financial Planning and the Financial Planning Association in March 2024, received 208 responses.
The report on the survey notes, “A hybrid approach to active or passive management continues to significantly outpace advocates of one or the other.” Indeed, only one-quarter of planners prefer a purely active or a purely passive approach; advocacy for all-active or all-passive was roughly equally divided among these planners.
By contrast, a recent survey of 8,550 individual investors globally from Natixis Investment Managers, finds that 61% of investors in Generation X believe that index funds give them access to the best opportunities in the market.
However, the study, titled Reality Bites: Retirement anxieties grow as Generation X turns 60, highlights that Gen X investors are confused about the pluses and minuses of passive investing. Nearly two-thirds of Gen Xers understand that index fund are designed to provide returns that are comparable to the market return, but only 54% think that index funds are cheaper.
More concerningly, 61% of Gen X investors think that index funds are less risky, and 67% believe that index funds will protect them on the downside. Of course, neither statement is true; index funds provide market returns – whether those returns are positive or negative.
On the plus side, Gen Xers know that they need help with investing; over half are convinced that they need professional advice.
Overall, these studies suggest that myths about passive investing have wide currency with the investing public, even while investment professionals see the need for both active and passive approaches in portfolio construction.