A few months ago, I took a mighty leap and publicly renounced passive investing in my blog – at least as a term for describing the same long-held evidence-based investment strategy to which I remain a loyal adherent. Since that spring post, it’s been gratifying to see momentum continuing to build in favor of evidence-based investing:
- The LinkedIn group “Passive Investment Professionals” renamed itself to “Evidence-Based Advisors” and recently topped 1,000 members.
- In the U.K. a colleague let me know that the firm where she is marketing manager (and that is also the behind-the-scenes sponsor for the excellent Sensible Investing forum) is revamping its materials to replace “passive” with “evidence-based.”
- As I’ve been asking advisors across the U.S. and Canada about their preferred terminology, the term “passive” has become almost universally passé. More often than not, they’re embracing “evidence-based investing” instead.
Carpe Diem, Evidence-Based Advisors
So there you have it. Faster than the masses have been snagging iPhone 6s at their local distributors, “evidence-based investing” has begun taking the world by storm, or at least by an appreciable drizzle.
Which brings us to an unprecedented opportunity.
For as long as I’ve been knocking around the investment world, those of us in the evidence-based investment (formerly passive) camp have collectively struggled with defining what we do for investors as “the opposite of active investing.”
For the first time, I see a real and exciting possibility. What if we could turn the tables on being the stepchild of the status quo? What if YOU became the status quo as an evidence-based advisor, and those pursuing market-timing and stock-picking tactics were the ones who had to differentiate themselves from us?
Imagine that! As in most things in life, it would probably be a double-edged sword. On the one hand, an increasing number of investors would turn to evidence-based investing as their chosen strategy. This would not only better serve their interests as it always has, but it would be the more popular, widely accepted approach, making it easier embrace.
On the other hand, if evidence-based investing were no longer considered the perennial underdog, the term could devolve into having less meaning than I believe it has today. So far, those of us using the term are a relatively narrowly defined, easily identified group. But admittedly “evidence-based” is a broad term that could be too readily redirected to other meanings that may not be what we have in mind.
So here is my two-stage call to arms.
Step One: Seize the Evidence-Based Investing Day
Before others try to abscond with “our” term, evidence-based investing, I encourage you to use it yourself early and often. Similar to a trademarked tagline, if you repeat it often enough, it becomes so insurmountably yours that nobody else would dare lay claim to it.
For example, despite the generic nature of the expression “Just do it,” what non-Nike athletic footwear company in its right mind would ever try to repurpose the expression?
In contrast, let an expression languish in vague meaning and nebulous identity and, trademarked or not, the term will lose its impact; you will lose your rights to call it your own.
Step Two: Redefine the Term Formerly Known as Active
This begs a timely question: If we’re no longer passive, than what is active?
Proactively addressing this concern becomes especially important if our aim is to move from second fiddle to first chair in financial circles. During the past few years, I’ve seen considerable debate about what to call ourselves. But I’ve seen precious little discussion on what to call advisors formerly known as active. Somehow, “Prince” just won’t do.
The Opposite of Passive Investing Is …?
PWL Capital, a relatively large presence in Canada, appears to have embraced “predictive investing,” as shared in its February 2014 e-newsletter. I like that pretty well. Another phrase I have been contemplating is “speculative investing.”
But first things first. Before we can bootstrap any common new term into widespread use, we’re going to need to raise awareness and attempt a consensus – at least as much consensus as a group of fiercely independent thinkers are ever likely to achieve.
This will take some time as, no doubt, opinions will vary.
What are our next steps? I figure I’m just as good a candidate as anyone else to get the dialogue rolling. What do you think? Are you ready to storm the active castle and, if so, what shall we call our campaign? Send me your ideas and I’ll report back.