facebookIf it's widely known that only a FEW active fund managers will get results that beat the market, why is there such an inclination for people to choose active investing (and not passive investing)? - Seedly

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CryptoSensei

CryptoSensei

Level 11Β·Blogger at diaperfinancingfund.blogspot.com

26 May 2020

βˆ™

General Investing

If it's widely known that only a FEW active fund managers will get results that beat the market, why is there such an inclination for people to choose active investing (and not passive investing)?

Discussion (4)

What are your thoughts?

  1. Short term profit. Active investors can perform better in volatile markets by taking advantage of market dislocations.

  2. Reports illustrating greater returns for passive investing may be time-sensitive. Passive investing generally does better in bull runs and we recently had the longest bull-run between 2009-2020.

  3. Some actively-managed funds hedge against market risk by shorting the market. This is especially beneficial for business owners during recessions who may need to take money out of their investment portfolio to keep their businesses afloat.

Hariz Arthur Maloy

Hariz Arthur Maloy

25 May 2020

Level 15Β·Independent Financial Advisor at Promiseland Independent

Not every investment objective is to beat the market. Active managers can also deliver better risk adjusted returns than just pure alpha.

Also, even if 5% of active managers beat the market, 5% of 10000 of them, is still a good 500.

I have areas in my portfolio that are quite passive, and areas of my portfolio that are actively managed. Some securities or investing styles may not have indices made for them and thus no index fund to track them.

So it's up to you. I choose what works for me and I do my research and analysis for my own portfolio.

Index/Passive investing also has its faults and no strategy is perfect.

It's easier to believe that investing will get you out of the rat race than working hard in your bus...

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