In recent years, this has become a prevalent question among investors who covet capital appreciation but no longer believe high management fees are justified. The answer to this question really depends on the individual investor, however.
Passive Investing: Passive investing is investing with a long-term horizon. It is a very economical way to invest as the amount of trading is purposefully limited. The strategy requires a buy-and-hold mindset. Investors resist the temptation to react or anticipate the stock market’s every next move.
The prime example of a passive approach is to buy an index fund that follows one of the major indices like the S&P 500 or Dow Jones Industrial Average.
Active Investing: This strategy usually involves hiring a portfolio manager or investment advisor. The goal here is to beat the stock market’s average returns and take full advantage of short-term price volatility. A much deeper analysis is involved, and it requires a certain expertise to know when to pivot into or out of a particular stock or any asset. A portfolio manager usually oversees a team of analysts who look at qualitative, such as employee morale, company management and quantitative factors, such as P/E ratios, historical returns to try to determine where and when that price will change.
Which strategy resonates more with you? I would love to hear your thoughts!
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