Passive vs Active investing ? Which is better for long term investing ?

Excellent questions.

for stocks and very longterm horizon passive (via indexing ETFs) seems the best choice

for that read more here:

https://seedly.sg/questions/what-is-your-genera...

If you are asking this question, it’s better to go passive and read up more about investing first. When you are able to beat the market, then you will have your answer. :)

You are ready for this long term commitment today. Just like we cannot predict future performance of active/passive funds, we also cannot predict your future financial health. Many articles debate on choosing between active and passive, but this is not a custody battle. You can do both, since you are new to this, and have some padding in money and insurance (which you should review from time to time. Sorry, occupational habits).

Try them out, see how they perform, the fact that no one can answer probably means neither is vastly superior than the other, each have their own pros and cons which only individuals who experienced it can best determine themselves.

Hi Anonymous, thank you for your question. This is Alvin Neo, an adviser from MoneyOwl and would like to share some insights. I understand your dilemma in choosing a suitable investment approach for yourself. Hope the following helps you.

First of all, it is important to have a strong financial health before embarking into investing, which you have already done so. This allows you the ability to ride through short term investment fluctuations in order to achieve long term return. A strong financial health includes disciplines such as having adequate emergency fund, protection and not taking excessive loans.

Next, what exactly is active management? Such approach usually focuses on ability to forecast and capture investment opportunities in the market to achieve above market returns. This typically means:

· Picking individual securities

· Picking the times to be in and out of market

· Picking times to move from one asset class to another

· Picking the next hot investment theme

· Picking an active fund manager based on his/her recent performance

However, studies have shown that it is not easy to beat the market. In one study by Michael J. Mauboussin, ex-chief investment strategist of Legg Mason Capital Management, between 1978 to March 2007, investing in the S&P 500 index gave an average annual return of 9.5%. If you successfully moved out your investment during the worst 50 days during this period, your returns would have jumped to 18.2% p.a. However, if you missed the best 50 days during this period, your returns would drop to a meagre 1% p.a.

Burton G. Malkiel, author of “A Random Walk Down Wall Street”, did another study on market return over the past 54 years. Out of the 54 years, market has risen in 36 years, stayed flat for 3 years and declined in only 15 years.

What these studies show is that if one tries to time the market and get the timings wrong, he/she can end up in a bad shape. Also, as markets are usually on the rise, the chances of being wrong is 3 to 1. This is a very stressful way to invest. Passive investing or rather staying invested to get market returns is a more reliable approach than timing the market.

At MoneyOwl, we are convinced that in the long term, through the ups and downs of the markets, the 3 things that are crucial to a good investment experience for our clients are:

1. Investing into a globally diversified portfolio

2. Do not try to beat the market. It just does not make sense when the evidence shows that the returns from the market in the long term can give you what you need.

3. Keep cost low. Cost is probably the only thing we can control in investing.

Additionally, clients can also access a MoneyOwl adviser to guide and coach them in their investment journey.

To find out more about how MoneyOwl helps to create a successful investing experience, you can read here: https://advice.moneyowl.com.sg/the-right-way-to...