BACKOne of the core tenets of passive investing is broad diversification and, in my opinion, this is best achieved by using asset class funds (ACFs) rather than index funds. Asset class funds aim to own every stock within a specific segment of the market such as large companies or emerging market companies. They are not obliged to track any arbitrary index. Managers can wait for favorable trading opportunities rather than being forced to buy or sell because an index dictates. This helps to minimize costs, reduce turnover and broaden diversification.
Tools of the Trade
Author:
Mimi H. Boblitz
Published on: April 19, 2012