Hi Jason,

Great article. It certainly provokes thought and discussion.

As you pointed out, we are human and emotional. We are not the rational, homo ecomonmicus persons we ideally should be.

Hindsight is 20/20. The fact is people need to sleep at night and not worry frantically about their ability to fund retirement, education and daily living expenses. Therefore, I think defining risk as short-term volatility is ONE appropriate measure because too much short term volatility in a portfolio could cause people to react irrationally and fearfully and abandon investing to their long (and short) term detriment. As advisors and investment managers, we are servicing humans, not machines.

Regarding passive investing and ETFs, I use them to fund children's 529 plans and some of my personal assets. I think they are a necessary part of a diversified portfolio as an efficient way to capture systematic market exposure. That being said, the utilization of passive investing is relatively new in the market. The use of ETFs is exponentially greater today than it was 10 years ago, and more so than 30 years ago. My concern is investors are getting a "free lunch" and many who have only started investing after the Great Recession (when the stock market has gone straight up with high correlations in equities) are, to borrow a phrase from Game of Thrones (and credit o my eldest, wisest brother on this anology), Children of Summer. So I am skeptical that ETFs are a new, fool-proof answer and passive investments are going to decimate the asset management business. A smart hedge fund guy I used to work with said "there's a new in a life time crisis that happens once every ten years". I could see ETFs being the catalyst to the next one. We will see. Markets work themselves out all the time.

But we shall see and I thank you very much for your excellent work.

Best,

Nick