I recently read an Vanguard piece by Tom Rampulla Read Here of Vanguard. As you might expect it focuses on fees as the primary determinate of return. All the while, the active management crowd promotes skill over fees.

The difference in return between these two approaches is minimal over a Secular Bull Market. The question of active versus passive management then is the wrong question.

The right question is how to make a significant difference in return. The answer is to know when the market is going up on a longer term basis and when it is going down. The Dow Gold Ratio Strategy provides the solution.

During Secular Bull Markets, the three approaches will have similar returns (excluding using leverage.) There will be small differences in returns. In these up markets active management will outperform passive at times and passive will outperform active at times. As the DGR Strategy uses index funds, it will perform in line with passive management. The confidence the DGR Strategy give you to use leverage will make a huge difference though.

The real difference comes when we go into a Secular Bear Market as we did in 2000 through 2013. The DGR Strategy, gave you significant gains in gold while the other two approaches has significant losses in stocks. Gold was up over five fold during this time while stocks failed to have positive returns until after 2011.

The right question is whether we are in a Secular Bull or Bear Market and not whether active or passive investing is important.