There’s a great debate raging about what style of investment management is better, active or passive. And if you ask 10 different financial professionals, you could get 10 different answers. So first, let’s understand the difference.
Active investing is aimed at taking advantage of potential opportunities in the market, one by one. Passive investing, on the other hand, is typically tied to a market index and is aimed at performing on par with the market as a whole, often over a longer period of time. The attached handout from Natixis, Active, Passive or Both, covers these two investment styles in more detail.
So which one is better? That’s a trick question! Financial professionals may recommend one over the other based on a client’s risk tolerance, timeline, and objectives. What’s “best” for you is likely completely different from what’s best for another investor. That’s why it’s critical to sit down with an experienced financial professional to see what makes the most sense for you and your future.