Active or passive: Wim Zwanenburg (Stroeve & Lemberger)
This article was originally written in Dutch. This is an English translation
By Wim Zwanenburg, Beleggingsstrateeg, Stroeve & Lemberger
To what extent are passive strategies appropriate in a volatile, inflation-sensitive or geopolitically turbulent market?
Passive strategies prevent you from overreacting to market turbulence and geopolitical uncertainty. You remain invested in the market, rather than making emotionally driven buying or selling decisions. With passive funds that track broad indices, you are automatically well diversified across sectors, regions and companies. This mitigates individual risks. In a market where volatility has increased, for example due to Trump's protectionist trade policy and uncertainty about import tariffs, logistics chains and inflation, the risk of selection errors by active managers is greater. If you do opt for actively managed funds – which may also include active ETFs – choose fund managers who are true to their convictions and have a low portfolio turnover rate. In other words, be passive, which is not the same as passively standing by and watching.
'Passive’ is not the same as standing by and watching.
How should you deal with concentration risks in passive portfolios?
Many index funds, as market-weighted passive funds, are heavily weighted in growth stocks (such as technology), which are more sensitive to interest rate rises due to inflation. After the excellent investment results of the Magnificent 7, their weight and concentration had increased significantly by the end of 2024. In the event of geopolitical shocks and a sudden shift in regional selection preferences, as in the first months of 2025, there is also greater sensitivity to profit-taking. A choice for “equally weighted” passive funds would then be obvious. However, the tide can turn quickly. The good investment results of many technology stocks were not only due to higher valuations, but also to strong profit growth and margin improvement. Service companies and software suppliers are less affected by import duties.
