Active vs Passive Investment Management: Which is Best For You?

Whilst there’s been lots of debate about which style is better; active or passive investment management, many people have not considered the very real difference an IFA can have on their investments.

The Difference Between Active And Passive

Passive investment strategies aim to maximize returns over the longer term by keeping the amount of trading i.e. buying and selling to a minimum. Generally the idea is to track the performance of a specific market or index and avoid the fees and drag on performance that can occur from frequent trading. It’s not aimed at making quick gains; it is more focussed on building slow, steady wealth over time. This is fine in a rising market but not so good in a falling market.

Active investment strategies attempt to outperform a benchmark. It is much more involved, with continuous trading. Active investors seek to profit by taking advantage of short term movements in price.

However, the simple active vs passive debate completely ignores the value Independent Financial Advisers (IFAs) can add. With literally thousands of investment funds available, choosing the right ones and achieving the right blend can be difficult. This is why IFA’s are needed.

Investing: a Personal Experience For Individual Clients

Investing can be a bit of an emotional roller-coaster. To be successful, investors need to be resilient and have plenty of patience. This isn’t always easy, particularly for clients with very little investment experience.

Good IFAs can set themselves apart with excellent client service through both good times and bad. Independent Financial Advisers should spend time listening, educating and providing advice and guidance to clients in order to build trust and keep clients committed to a sound long term investment strategy, regardless of whether it is active of passive.

If you’re a new investor or thinking about the future of your finances, at a glance the world of investing can appear daunting without knowing where to start. The IFAs at Adroit are experts when it comes to financial planning and can provide all the necessary advice and assistance to help make the most of your finances.

For a consultation please contact our experts online or on 0800 884 0006 for any investment advice.

Andrew Taylor, Independent Financial Adviser at Adroit Financial Planning.