Asked by Anonymous
Asked on 14 Mar 2019
This would boil down to what kind of investment your prefer. If you are someone who does not like to monitor markets then passive investing would be a better choice. If you like to actively monitor markets and see when is the best time to buy and sell shares then active investment would be a better choice!
It depends on your overall strategy and thinking.
Either way you could be better or worse off.
It ultimately depends on whether you know what you are doing or not.
Generally ETFs are diversified. And more for longer term outlook if you are talking about ETFs such as the S&P500.
There is no real passive investing, unless you buy all the markets in the world in their current weights. As soon as you buy an ETF, you're taking an active view. For example, if you buy an ETF tracking S&P500 - you're already taking a view that you want to own the largest 500 companies in the US by market capitalization. This is one definition of active/passive - that you have a view or not, about the future returns.
If you buy a 'passive ETF' it is simply tracking the index and not trying to beat the index. If you buy an 'active ETF' they're trying to beat an index using maybe a factor like Value or Momentum.
You can then also mix and match passive and active ETFs, and rotate between ETFs based on certain criteria )for example, people rotate between sectors based on momentum) -thats been an active inveestor (using passive ETFs usually).
So you see, these are quite misused terms !
what you should do depends on your skill levels, and return requirements. This is not easy, and it takes time. If you have neither, then a set of diversified active/passive ETFs that are rebalanced infrequently is probably the most convenient choice.