123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Investing---Finance >> View Article

Credence Independent Advisors: Active Or Passive What’s For You?

Profile Picture
By Author: Dwight Harris
Total Articles: 8
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

May 13, 2014

What do active investors do?

Active investors believe that markets are “inefficient”. They believe that, at any point in time, there are always some securities that are mis-priced, enabling them to buy or sell making a profit. Professional active investors devote unbelievable amounts of time and resource towards trying to find that extra edge. They will then trade in and out of those securities to try and generate profits above the benchmark. They pour over company financials, visit with competitors, study all the latest economic releases, and try to predict everything from corporate earnings to the direction of interest rates and currency movements.

What do passive investors do?

Passive investors believe that markets are “efficient.” They believe that, over the long run, the price of stocks and bonds reflect the true underlying value of those securities. As such, they do not seek to beat the market, but rather to “be” the market. They do this by using index funds and ETF (exchange traded funds) that mimic various components of the market. For example, rather than try to ...
... find that “next Apple or Google,” you can purchase (nearly) all large US stocks or (nearly) all small emerging market stocks in one go by buying the index in its cheapest form. Then, using the right asset allocation, they can create portfolio that has an appropriate risk exposure for the client.

Which style of investing performs better?

Passive investors outperform active investors more often than not. In the past 5 years, 75% of US Large Cap funds, 90% of US Mid Cap funds and 83% of Small Cap funds failed to beat their comparable indices. One reason for this may be the fact market surges (up or down) are unpredictable missing just the top 25 days of market performance over the last 40 years would result in you having 3.6% less per year than if you had just stayed the course.

Which style should you use?

Investing in both active and passive investments makes sense. In smaller more specialist areas of investment it can sometimes be difficult to find the right passive investment. In larger markets ETF’s and indexes can be cheaper and more efficient. There are a variety of measures to make the right decision. Consult with a professional to show you the options. If they aren’t clear then be passive with them.

Total Views: 471Word Count: 388See All articles From Author

Add Comment

Investing / Finance Articles

1. Finsta: Simplifying Finance With Smart Loan Management Software
Author: Ojeshwanigyb31

2. Direct Lender Installment Loans For Life’s Big Moments
Author: Novlik

3. Why Hiring An Sme Ipo Consultant Is Critical For Your Company’s Successful Listing
Author: IPO Consultant

4. $500 Cash Advance No Credit Check
Author: Easy Payday Lenders

5. Why You Should Consult A Pension Advisor In The Uk
Author: Financeadvisors

6. Fixed Vs Floating Rates: Smarter Housing Loans In Hyderabad
Author: anilsinhaanni

7. See Beyond: Master The Markets With Expert Online Stock Market Training
Author: seebeyond

8. Stock Market Advisory: How To Identify The Best Stock Advisory For Smart Investments
Author: SandeepS

9. Bridging Loans Finance Lenders For Amazing Experience
Author: Bull Venture Capital

10. Private Health Insurance Providers In The Uk: A Comprehensive Guide
Author: Financeadvisors

11. Equity Release: A Guide To Releasing Equity From Your House
Author: Financeadvisors

12. Do I Need A Financial Advisor To Withdraw My Pension In The Uk?
Author: FinanceadvisorsUK

13. Financial Planning Strategies For Digital Creators
Author: George Ivan

14. Fix And Flip Financing: The Bottom Line
Author: Bull Venture Capital

15. Top Tips To Choose The Right Equity Release Plan
Author: Financeadvisors

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: