Chapter 1: What is the main topic discussed in this episode?
You're listening to a Sharesies podcast. It was here to me the other day in light of kind of the geopolitical situation as well. One of the worst things that you can hear in investment circles is, oh, this time it's different. It's like, it's never really different, okay?
Chapter 2: How have markets historically responded to geopolitical shocks?
The market will work it out. But how much of a challenge to the model is a really big supply shock like we're seeing in the effects and uncertainty that are playing out, you know, in bond yields and interest rates and in indications of inflation and that kind of stuff?
Certainly, we are monitoring very closely the conflict in Iran currently. And we have looked, worked with our colleagues in our research group to help investors make sense of what this could mean for their portfolio and what we've found. So my colleagues in the research teams looked back at geopolitical events going back to the 1960s. And
After each sell-off, they start looking at how have equity markets performed following those sell-offs. And what they found is that within six and 12 months, if you look at history, we've gotten back to positive returns. So we like to zoom out and help people understand, yes, we can't predict exactly where we're going to be six or 12 months, but
History tells us that being patient, sticking with your strategy and not getting distracted by the short-term events will help you with your long-term goals.
I think probably Vanguard really started that whole ball rolling of aiming to kind of keep fee costs low so that you're getting as much of the upside as possible on a diversified product. Is that challenged in any way by, I guess, other models?
Say we're activists starting to make better use of AI products to try and be a little bit more analytical without the high costs necessarily of bringing in a bigger team to do it. Do you think there's going to be some change or challenge there?
I think that indexing has continued to be a proven strategy and that we have seen investors, millions of investors benefit from indexing and that low cost diversification over time. But that being said, I believe there's a role for active in portfolios as well, and the two can complement each other very well.
The key, though, and you were going there because Vanguard, as you said, were big proponents of low fees. When we're talking about how you think about active managers, we're very focused on making sure that not only do we believe the manager has that edge or really has that manager skill they can deliver over time, but also that they have very manageable low-cost fees.
Because as you and I know, every dollar you pay in fees, that's a dollar away from your return. And even small costs in your portfolio can really compound and add up over time. So my view is active and passive and complement, but the fees have to make sense.
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