My general preference is to use low-cost passive funds where appropriate. That does not mean doing nothing. It does not mean being lazy. It does not mean ignoring risk, asset allocation, tax, currency, jurisdiction, time horizon or income needs; It means accepting a simple truth: markets are very difficult to beat consistently.

A passive fund does not try to outsmart the market. It simply aims to track a market or index, such as global equities, US equities, UK equities or global bonds. You are not paying a fund manager to guess which company, sector or region will outperform next. You are buying broad exposure to the market itself.

Active management is different. An active fund manager tries to beat the market by selecting certain shares, bonds, sectors, countries or themes. Some will do well for periods of time. Some will have brilliant years. A few may even build impressive long-term records.

But the important question is not: can any active manager outperform?

Of course they can, the better question is: can we identify them in advance, stick with them through difficult periods, and still be better off after fees, trading costs and tax? That is where things become much harder.

The market is not perfect, but it is highly efficient. Every day, millions of investors, analysts, institutions, pension funds, hedge funds and fund managers are looking at the same companies, data and economic information. Prices move quickly because new information gets absorbed quickly.

That does not mean markets are always right. They can be emotional. They can overreact. They can become too optimistic or too pessimistic; But they are extremely competitive.

Morningstar’s long-running Active/Passive Barometer found that only 21% of active strategies survived and beat their average passive peers over the 10 years to 2025. In other words, almost 8 out of 10 either failed to outperform or did not survive the period.

S&P Dow Jones’ SPIVA research tells a similar story. Over longer timeframes, active managers generally find it harder to outperform their benchmarks, not easier. Its year-end 2024 US Scorecard reported that a majority of active equity funds underperformed their assigned benchmarks in 2024, and longer-term results have consistently shown the challenge of beating the index after costs.

This is the point many investors miss, an active manager may outperform over one year. They may even outperform over three years. But as the timeframe gets longer, the odds of consistently beating the market usually become worse.

Over short periods, almost anything can happen. A fund manager can have a strong run. A certain style can come into favour. A market theme can dominate. A concentrated portfolio can look genius for a while.

But long-term investing is different, over 10, 15 or 20 years, fees compound. Mistakes compound. Trading costs compound. Poor timing compounds. Fund switches compound. Investor behaviour compounds.

This is why passive investing is so powerful. It removes the need to constantly guess:

Instead, the focus becomes much more sensible:

“What return do I need? What risk can I tolerate? What timeframe do I have? What tax structure should I use? How much income do I need? What happens if markets fall? What happens if I die, become ill, or relocate?”

That is real financial planning.

Active fund management is easy to sell because it comes with a story.

Sometimes that may be true. But investors need to be careful. A good story does not automatically produce good returns. Investment managers will challenge this until they are blue in the face, because their business model often depends on persuading people that skill can consistently beat the market.

But the evidence is uncomfortable.

Most active managers do not outperform over the long term. Many that do outperform for a period later fall back. Others close, merge or disappear from the data. And even where there is genuine skill, it can be incredibly difficult for normal investors to identify in advance.

This is why I prefer to be boring.

Boring does not mean careless: it means building a portfolio around the financial plan, not building a financial plan around the latest investment trend.

This is the obvious question.

If advisers are not claiming they can consistently beat the market, what value do they actually bring?

It is a fair question.

The answer is that proper financial advice should not be built around pretending to predict markets. It should be built around helping people make better financial decisions.

Investment returns matter, of course. But they are only one part of the picture.

A good adviser should help with things such as:

As the behavioural finance world often reminds advisers, people do not just need assets under management; they need help managing behaviour, decisions and emotions. Humans Under Management, for example, is built around the idea that adviser value is closely linked to behavioural coaching and helping clients make better long-term decisions.