Why Buffett and BlackRock Think You Should Fire Your Fund Manager

Are you good enough at picking stocks to beat the market? Not too many people would claim that. Is your asset manager good enough? The $10 trillion invested in active-management funds is a bet that the answer is yes. But more and more people are saying no, including the world’s largest asset manager, BlackRock, which is paring back its active-equities group. BlackRock is responding to a surge of money into what’s known as passive investing. It’s an approach endorsed by Warren Buffett, who thinks the smartest thing your money can do is climb into the hammock and take the rest of the day off. The debate over active vs. passive is upending the investment industry.

It’s what used to just be called investing -- buying or selling individual stocks or bonds. More commonly these days, it means putting money into mutual funds whose managers make those case-by-case decisions for you. The idea is that professional money managers will get better returns than you, the average investor, will. Either way, somebody is making active decisions about what’s in a portfolio.