so sánh điểm giống nhau và khác biệt giữa hai phương thức đầu tư chủ động và đầu tư bị động. xu hướng cachs nhà đầu tư trên thế giới đang theo đuổi để dạt lợi nhuận vượt trội, từ đó liên hệ đến thị trường chứng khoán tại Vietnam ( english version)
Topic 1: Active Asset Management versus Passive Asset Management I INTRODUCTION It is true that the issues related to a passive investment strategy versus an active investment have become one of the most controversial issues of both academics and investors This essay will analyze the principal problems and offer some personal insights on both methods Active Investment Strategy Portfolio management in an active way is based on analysis of securities combined with the macroeconomic situation of portfolio managers Investors or fund managers will analyze the business situation of the companies, the macroeconomic situation is analyzed carefully and frequently to select stocks with high growth potential in the long term.(Mauboussin, 2001) Active investment means that investors can decide to stop trading when the market shows signs of uncertainty or sell orders if the market is in crisis, investors not only survive the storm but also profit from it Often in underdeveloped or unsustainable markets will have the best chance of making a profit Portfolio managers try to buy low-priced bonds, hold them until prices rise and sell these bonds to maturity for arbitrage Such aggressive investment is much more flexible than investors simply buying and holding stocks In short, active investment management attempts to “beat the market.” The goal of active management is to take full advantage of short-term price fluctuations and try to determine where and when that price will change (Andrew Ang, 2010) Passive Investment Strategy Unlike active portfolio managers, index managers can’t sell poorly run companies They must buy every stock in a given index and keep it as long as it stays in the index As a result, index managers typically own a broad swath of the market and often hold those stocks indefinitely This encourages them to focus on issues that could have a bearing on shareholders’ outcomes over the long-term.(Morningstar, 2014) This strategy is most commonly understood as a buy-and-hold strategy where investors buy and hold securities for a long time, during which time they almost had no adjustment or minimal adjustment of the that portfolio Passive strategy is encouraged by Efficient Market Hypothesis of which there are three versions (Fama, 1965, 1970) The weak form means pass informations reflect on current price (based on information in the past, the speculators did not beat the market) The semi-strong form says stock prices have been fully affected by information disclosed in the past and information has just announced Thus, speculators can not rely on that information to be able to buy low sell high, as soon as the information is published, the stock price has changed The strong form of this theory further confirms the effectiveness of the financial market that the price of the stock reflects all past, current and insider information Followers of EMH not controvert that actively managed funds can beat passively managed funds, this would only happend through short-term luck and could not be systematically achieved, especially net of investment and trading costs, however For instance, 230 mutual funds were investigated by Bollen and Busse (2005) and they found any superior performance disappeared after one year from 1985 to 1995 Carhart (1997) discovered the same result for 1900 mutual funds studied from 1962 to 1993 Therefore, there is no need to look for the wrongly priced securities and buy and sell securities actively Investors who pursue passive strategies often diversify their portfolio to make their portfolio match a stock index Consequently, passive strategies are often referred to as match-index strategies The most purely passive strategy is to strategically match the index completely According to this strategy, investors will choose a benchmark such as the S & P 500 Their portfolio has fallen exactly as the S & P 500 index is falling For example, Apple accounting for 22% of the S & P 500 index , the portfolio also holds 22% of Apple In Vietnam, VN-Index, VN30, VN100… will be selected as a benchmark Investment trends in the world David Swensen is an investment expert, author of several books and former investment manager of Yale Investment Fund He is a prime example of index investment In his book “Unconventional Success”, published in 2005, he writes “Most individual investors lack of the expertise that needed to succeed in in the increasingly competitive investment market today As a result, passive index funds are the best choice for these investors" Index mutual funds are a simple and almost safe investment method cause investing in many market segments, spreading risk.These funds are often used by investors who have a little experience or skilled investment professionals with large portfolios There are several seminal publications supporting passive investment strategies Treynor (1965) pioneered the idea of measuring and incorporating risk in the calculation of investment returns Sharpe (1966) and Jensen (1968) performed the early tests of comparing the returns of active mutual fund managers to the returns from a broad passively managed portfolio, such as based on the Dow-Jones Industrial Average Sharpe (1966) concluded actively managed portfolios yielded no consistently superior performance after deducting management costs Jensen’s (1968) results were even bolder—actively managed funds could not provide superior returns even if management fees were zero Fama and French (2010) extended Sharpe’s general findings for more recent mutual funds Malkiel (2011) has touted passive investment strategies by showing how a diversified mix or investments representing all major economic sectors yields higher after2 cost returns over long investment periods Asebedo and Grable (2004) found that paying for active management through mutual funds with higher fees yielded inferior performance compared to the returns from funds with low fees Index mutual funds are a simple and almost safe investment method cause investing in many market segments, spreading risk These funds are often used by investors who have a little experience or skilled investment professionals with large portfolios figure 1: investors choose index funds Morningstar notes that the amount shovelled into passive funds in 2016 was more than four times that of active funds (Research, December 2017)Passive investing has become a hot issue In present, accounts for a larger share of publicly traded assets figure 2: Surveyed Manager AUM Split Into Passive and Active ($ Billion) The table above illustrates three biggest asset managers which are BlackRock, Vanguard, SSGA seem to like passive inesting rather than active investing More than half of their assets are passive Figure 3: Funs to Beat the Index According to Mark Carhart (1997) study of large US mutual fund showed that mutual fund only beat the market 1/3 time, also according to Morningstar research (2017) (Figure 3), so far only about mutual funds can beat the market Figure : Global Fund Assets Split Into Active and Passive ($ Trillion) In august 2017, according to ETFGI advisory firm, demand for ETFs rose sharply this year (Figure 4) During the period January-July 2017, investors injected $ 391 billion into ETFs, surpassing a record $ 390 billion last year Thus, index funds have attracted nearly $ 2.8 trillion since the beginning of 2008 Although passive investment is becoming more popular in the world, Global Fund Assets Split Into Active and Passive increasing, only about 25% market funds Active vs Passive Investing - strengths andweaknesses Active Investment strategy There are two main advantages of active investing Firstly, investors may have the opportunity to earn potentially market-beating returns.(MadisonFund, July 2, 2012.)Active investors believe that they can beat the market by predicting trends and investing in hand-picked stocks Secondary, investors can flexibly diversify their portfolio They can easily change their porforlio, look for better stocks, or easily make a sale or still hold decision on a stock that is not good However, this investment still has some shortcomings First of all, human error No matter how good fund managers are, there is no denying that they will make mistakes and that they will not always be able to beat the market Next, active ivestment have high cost Whether or not to create a return, active fund’s clients still lose a certain amount of fee Even if those funds make a return, investors will also have to deduct a percentage of the fees and commissions The average actively managed stock fund, incurs annual expenses of around 1.3%, or $1.30 for every $100 an investor has in the fund.(WhartonSchool, Feb 02, 2011) Pasive Investment strategy Compared to active methods, passive methods seem to have more advantages Personally, a passive investment strategy has six advantages Firstly, easy investment.Large funds in the market make it easier to distribute and diversify assets Secondly, better quality management.The passive nature of index investment helps to eliminate mistakes made by managers as in active management mutual funds Thirdly, Investing in indexes is far less costly than active fund management In a letter that Warren Buffett sent to shareholders of Berkshire Hathaway Inc on March 25, 2017, he pointed out that in the past 10 years, investors have wasted $ 100 billion on fees, while interest was belong to the managers instead of their customers Investing in the index requires less stock trading, thus reducing the cost of taxes and other expenses Lastly, The investment performance of index funds outperformed active investment funds in the long run Over the 23 years finishing in 2009, while actively managed funds trailed their benchmarks by an average of one percentage point a year, an index fund would have returned between 9.8% and 9.9%, with a small amount for fees (WhartonSchool, Feb 02, 2011) Although there are many advantages, passive investment still has certain limitations Limited return is the first weaknesses of this investment Investors who choose this investment strategy will only get a low return even when the market is in a state of turmoil (because this strategy can not beat the market) Secondary, less opportunity than active management Passive investment strategies are overly focused on large caps, which mean that the other stock could not be found Returns can be affected by political conditions or regulatory events Lastly, volatility in investment Returns can be affected by political conditions or regulatory events; investor must always follow on stock market movements and worry when values drop Investment strategy in Vietnam Refer to the Vietnam’s stock market The stock market in Vietnam is a new market compared to other developed countries in the world However, in the past 10 years, the stock market in Vietnam has become more active, investors have also begun to learn investment methods in the world, including two main investment procedures being Investors and hedge funds are active investment strategies and passive investment strategies Investmen funds in Vietnam 2018 24.32% 2.70% 5.41% 62.16% mutual fund fund certificate Vietnam Equitization Focused Member Fund ETF real estate funds 5.41% Figure 5: Investment Funds in Vietnam 2018 Source: State Securities Commission of Vietnam According to State Securities Commission of Vietnam, as of 31/01/2018, Vietnam has 37 funds (Figure 5), of which only 02 ETFs account for 5% of the total funds in Vietnam So why does not ETF grow in Vietnam? Passive investment depends on effective market theory as I mentioned above However, does the Efficient Market Hypothesis work in the real world? Figure3 presents studies on the weak form of the Vietnam stock market from 2000 to 2013 Figure : Studies on the weak form of the Vietnam stock market over time 20002005200720002000200020092005 2008 2010 2009 2011 2013 2012 Truong Dong x authors 20092013 Loc Pham Vu x Thanh Long Vuong Duc x Hoang Quan Nguyen Thu x Hang Nguyen Thi Bao Khuyen Frances Guidi & Rakesh Gupta Phan Khoa Cuong Le Chung Thanh Thao Source: National Institute for Finance x x x o o '' x 'is negative for effective market existence,' o 'is to confirm the existence of effective markets in vietnam for the period 2000-2013 According to studies of different authors on the market in Vietnam for the year 2000-2013, only two studies have identified Vietnam as an effective market That indirectly reflects the passive investment form in Vietnam is not effective Moreover, the psychology of Vietnamese investors is often too confident and susceptible to fluctuations in the market.(Hien, 2012) Thus, active investing is preferred in Vietnam due to the flexibility of portfolio changes Conclusion In summary, it is impossible to say with any certainty what kind of investment would make more money The answer depends on the risk appetite as well as the preferences of each investor More importantly, at different times; investors will make different investment decisions In a recent speech, Warrent Buffet tended to favor investing in index funds and praising passive investment He argues that active investment strategy costs too much and that return is not high "Continuing to buy the cheap S & P 500 fund is something that I think is the most realistic at all times." he shared on CNBC However, if only choose a passive investment strategy that does not use active investment strategy, it is no different than gambling Passive investing is best suited to longer-term investors who are happy to leave their money in place for at least a few years Therefore, investors in the world always give priority to active investment funds in real The stock market is getting more volatile with a lot of ups and downs and investors are hoping to find a “Black Swan event” that can beat the market In addition, many investors find that active investment is an attractive investment strategy in certain market segments where the market is ineffective, such as investing in stocks of small cap Return to Warrent's speech and look at the reality, he became a billionaire when he beat the market with active investment rather than investing in indicators When he had the extra money after that, he put a few into the index funds to get a certain return every year I would personally choose a passive investment strategy for bluechip stocks when the stock market is stabilizing But will divest capital into active investment when seeing signs of market abnormalities or other intangible political events that affect the market in general References Fama, E (1965) The behavior of stock market prices Journal of Business, 38(1), 34-105 Fama, E (1970) Efficient capital markets: A review of theory and empirical work Journal of Finance, 25(2), 383-417 Fama, E., & French, K (2010) Luck vs skill in the cross section of mutual fund returns Journal of Finance, 65(5), 1915-1947 Jensen, M.(1968) The performance of mutual funds in the period 1945-1964 Journal of Finance, 23(2), 389-416 Asebedo, G., & Grable, J (2004) Predicting mutual fund performance over a nine-year period, Journal of Financial Planning and Counseling, 15(1), 1-11 Research, M M (December 2017) Passive Fund Providers Take an Active Approach to Investment Stewardship Le Chung Thanh Thao (2012), Efficient Market and Signaling Hypothesis on Vietnam Securities Market 2009-2012”, Việt Nam: Hồ Chí Minh Nguyen Thi Bao Khuyen (2010), Stock prices and macroeconomic variables in vietnam: an empirical analysis, Vietnam - Netherlands project for m.a in developing economics Phan Khoa Cương (2013), Market efficiency in emerging stock markets: A case study of the Vietnamese stock market Truong Dong Loc (2006), Testing the Weak-Form Efficiency for the Vietnamese Stock Market, Netherlands Journal 10 VOICU, A passive vs active investment management strategies 11 Carhart, M (1997) "On Persistence of Mutual Funds." The Journal of Finance, Vol.52, No 1, 57-82 12 ANDREW ANG, W N G., STEPHEN M SCHAEFER 2010 The Efficient Market Theory and Evidence : Implications for Active Investment Management [Online] 13 HIEN, D N D 2012 Investor psychology in the financial market in Vietnam 14 MADISONFUND July 2, 2012 THE ADVANTAGES OF ACTIVE MANAGEMENT 15 MAUBOUSSIN, A R A M J 2001 Does It Pay to Be active Investor? 16 MORNINGSTAR 2014 Active Passive Strategies 17 RESEARCH, M M December 2017 Passive Fund Providers Take an Active Approach to Investment Stewardship [Online] Morningstar 18 WHARTONSCHOOL, T Feb 02, 2011 If Index Funds Perform Better, Why Are Actively Managed Funds More Popular? [Online] Available: http://knowledge.wharton.upenn.edu/article/if-index-funds-perform-better-why-areactively-managed-funds-more-popular/ 10 ... of 2008 Although passive investment is becoming more popular in the world, Global Fund Assets Split Into Active and Passive increasing, only about 25% market funds Active vs Passive Investing... traded assets figure 2: Surveyed Manager AUM Split Into Passive and Active ($ Billion) The table above illustrates three biggest asset managers which are BlackRock, Vanguard, SSGA seem to like passive. .. distribute and diversify assets Secondly, better quality management. The passive nature of index investment helps to eliminate mistakes made by managers as in active management mutual funds Thirdly,