Active investing refers to a strategy where investors actively make decisions and regularly buy/sell assets within their investment portfolio, based on their expertise, market analysis, and research. It involves actively managing investments to achieve higher returns, rather than simply holding assets for a long period of time with minimal changes.
Full definition
I believe there is a case to be made
for active investing for many investors, provided it is done the right way.
For those comparing the returns from passive investing in stocks and bonds
with active investing in real estate, that is comparing apples to oranges.
I think this and the previous posts are comparisons of passive index investing
vs. active investing via mutual funds.
Believe me it'd be more interesting, popular, and likely lucrative to focus
on active investing, but it's not the right course for most.
If active investing was a skill you could definitively learn and profit from, I think many would prefer it to the 9 - 5.
If you accept even some of my explanation of
why active investing is failing, at least collectively, there is a kernel of good news in that description.
What I am telling you is that a lot of others who have tried beating the market
through active investing have not succeeded, despite thinking that they would at the outset.
You can
make active investing work effectively if you carefully select investments with a proven long - term investment approach, follow a disciplined investment process, and make sure you pay reasonable fees.
If the costs to uncovering and evaluating relevant information are low, then it doesn't take
much active investing to get markets to be efficient.
That
requires active investing (developing knowledge, time and skill) of which most of the investors I deal with are not interested in being.
And
while active investing may be something of a gamble, it's not as reckless as playing the lottery with your life savings.
Investors will be better off if the market evolves to a much smaller
active investing industry with clients able to look beyond short - term results to judge their investment managers on process.
You can't be good
at active investing without putting time in at least at the level of a hobby, say, one hour per day, six days a week.
Where active investing requires a tremendous amount of work against stiff competition, passive investing doesn't involve any effort.
I
prefer active investing for myself, but guys who like passive need to remember that you have to allow your strategy — whatever it is — some time to work.
You can take a somewhat hands - off approach and put your money in ETFs or you can invest in one of the thousands of
active investing ideas that are out there.
Unlike active investing in the stock market, retirement accounts should be approached with a «set it and forget it» mentality.
If you are going to do your
own active investing, I believe value investing is really the only method you have any chance of succeeding.
It's also important to realize that when you
compare active investing with passive investing, you need to make «apples - and - apples» comparisons.
Here are my ingredients for
active investing success, though I will add the necessary caveat that having all these ingredients will not guarantee an investment payoff.
Trying to beat the market (so -
called active investing) is definitely a more complex exercise than simply trying to keep pace with it (so - called passive investing).
Learn more about this opportunity to learn
critical active investing skills that will enable you to trade the markets of 2012 with confidence and consistency.