Since the first index fund was launched in the early 1970s, the concept of passive investing has come a long way in terms of earning respect. For broad U.S. equity mandates in particular, finding supporters of active management is getting tougher in the 21st century. And among those managers who claim to mint alpha relative to broadly defined benchmarks, such as the Russell 3000 and MSCI U.S. Broad Market Index, many track records look a lot less impressive after adjusting for size (market cap) and style (value).

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There are countless investment strategies, but arguably there’s only one true benchmark: the market portfolio, defined as a passive allocation to all the major asset classes, initially weighted by the relative dollar values and thereafter left to the whim of market fluctuation.
This benchmark isn’t necessarily appropriate for everyone as an investment strategy, although it’s easy and inexpensive to build, thanks to the proliferation of index funds, ETFs and ETNs. Yes, it’s a mindless measure of the risk and return profile from a broad-minded definition of markets. And yet the results over time, although middling (as you’d expect), look pretty good these days.

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