MODERN INVESTING
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Passive Investing

-Passive investing usually refers to index investing (indexes try to track the overall return of a country or industry sector), but in recent times it is really just synonymous with simple rule-based investing.

-Passive investing tend to have a lower fee then traditional active strategies, this is due to the reliance on new technology and a rule-based system of choosing securities.
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-Passive investing takes on Systematic Risk (or market risk), meaning that the return or loss of your portfolio will depend on the overall market.

-Passive investing can only ever get the average return of the overall market. 

Active Investing

-Active investing usually refers to having an active manager (someone who picks stocks and bonds directly, usually within a certain country or sector). 


-Active investing tends to have a higher fee because they must pay managers and more administration.


-Active investing will take on more Unsystematic Risk (or specific risk), meaning that the risk comes from how well specific companies increase or decrease shareholder wealth.
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-Active investing aims to get more than the market average. However, because they are a part of the market only about half of them can theoretically succeed.


Conclusion​   

-Passive investing has become a more common investing style in the last decade because of the increased availability of ETFs and other options. Passive investing is the preferred method for people that wish to rely on portfolio theory and are conscious of the fees associated with trading.
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-Active investing can be good with the right management; however, it is unclear how to choose the right manager. The other factor that you must consider is whether or not the manager is worth the fee. 
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-Remember that both are just strategies and you must weigh the pros and cons before investing in either one.


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  • Financial Planning
    • Our Approach
    • What is Financial Planning?
    • Cost of Modern Investing
    • Types of Planning >
      • Retirement Planning
      • Tax Saving Strategies
      • Budgeting Basics
      • Insurance Planning
      • Estate Planning
    • Investment Blog
  • Investments
    • What is Investing?
    • Passive vs. Active Investing
    • Why Fees Matter
    • Different Types of Investments >
      • Exchange-Traded Funds ( EFTs )
      • Segregated Funds
      • Mutual Funds
      • Real Estate
  • Insurance
    • Why do I need Insurance?
    • Types of Insurance >
      • Life Insurance
      • Critical Illness Insurance
      • Disability Insurance
      • Health Insurance
      • Long-Term Care Insurance
    • Group Benefits
  • Contact