Naturally, passive products look good as markets move higher. They’re designed to replicate an index and, therefore, have a symmetrical return profile. Unfortunately, the same symmetry that investors like so much on the way up is what causes the most financial harm on the way down. In bear markets, passive products can fall just as much as the index, often as much as 50 percent or more, as we saw in 2000 and 2008. It’s time for investors and their advisors to pause long enough to remember those catastrophic losses.
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