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Investing: Active vs. Passive - Coggle Diagram
Investing: Active vs. Passive
Passive
These investors typically purchase an investment without monitoring it or doing research into it.
They like to buy a large number of different stocks, which is referred to as "Diversifying." They do not want to beat the benchmark, but they try to mimic it.
Passive investing is an investment strategy to maximize returns by minimizing buying and selling efforts.
Active
These investors continuously monitor their activity to exploit profitable conditions and find the best buying or selling options.
They do this so that they can pass the benchmark amount that they want to achieve. This is called "Alpha Return."
Active investing refers to an investment strategy that involves ongoing buying and selling activity by the investor.
Similarities
You need to remember to continue investing no matter what strategy you are using.
You must continue to be well informed and not go by gut feelings or irrational thought processes.
There are lots of different kinds of funds for both kinds of investment styles that do different things. You should at least look into them before deciding to purchase one.
It can be helpful to get a broker to help you with this.
You need to stick with what you decide no matter what happens with the market.
You must be able to understand how your money will act. So, you need to make sure that you do research into what you are doing, or at least get someone to help you understand.
Differences
Active investing is focused on possession of a few stocks to monitor. Passive investing diversifies so as to minimize risks of loss.
Active investing is focused on the short-term and quick turnaround for quick returns. This requires careful monitoring of the market. Passive investing requires no real monitoring of the market and trusts in the return over time.
Passive investing has fees that are often below 0.5%, while
Active investing often has fees as high as 1.0%.
Passive investing focuses on large established companies, while Active investing focuses on market trends and technologies.