Silencing Jack Bogle

Tickers in this article: DBA DBE GLD PALL PPLT SJNK SLV SPY UGA
NEW YORK ( TheStreet) -- Maybe it was all the foie gras and champagne. Perhaps it was the Escoveitch salmon and faux Ritz Side Car cocktails.

But for some reason, the celebration I attended in Manhattan on Tuesday night marking the 20th anniversary of the first exchange traded fund, State Street's SPDR S&P 500 ETF (SPY) enabled me to reach my epiphany for 2013. Since I only get one a year, I was surprised it happened so early on.

It's this: An active investment management style is superior to a passive one.

Hopefully, this puts to rest the uncertainty I know resides in many investor's minds. It's right up there with paper vs. plastic and Ginger vs. Mary Ann and other raging debates. Perhaps my declaration will silence Vanguard founder Jack Bogle too.

But seriously, it is true, and for a very simple reason. Passive investing is nothing more than a theoretical construct. In reality, it cannot happen. Perhaps I should say does not happen.

Specifically, not a single investor I've met in 20-plus years on the Street -- trust me, that's a big number -- has ever put all of their money in a broad market index or ETF and let it ride for their lifetime.

They put some in SPY, and some in bond funds to manage volatility. Or they put some in SPY or some in small-cap indexes to add a growth component. Still others buy individual stocks and then ETFs or indexes.

Whether you do this on your own or with the help of an adviser, the fact is you are engaging in active asset management. Further, unless you want to own SPY and SPY only for the rest of your life, this active management is your only option.

That said, my advice to investors is to remain agnostic with respect to financial product formats and focus on combining assets in such a way that you position yourself to achieve highly specific financial goals.

Specifically, I believe that active small-cap managers are worth their weight in gold during bear markets. Remember, losing less than the indexes is winning. Further, I prefer in-country active managers for international equities over passive portfolios.

I practice what I preach. For the GMG Defensive Beta Fund, which I co-manage with a mandate to provide long-term capital appreciation with less volatility than broader equity markets, we combine passive ETFs (and ETNs, where the "N" stands for notes) with individual equity selections. All totaled these passive investments constitute about 31% of our holdings.

Besides SPY, they include: Powershares DB Agriculture (DBA) , Powershares DB Energy (DBE) , SPDR Gold Shares (GLD) , iShares Silver Trust (SLV) , ETFS Physical Palladium Shares (PALL) , ETFS Physical Platinum Shares (PPLT) , United States Gasoline (UGA) and SPDR BarCap Short-Term High Yield Bond ETF (SJNK) .