Page 45 - DIY Investor Magazine February 2018

So, even if only 10%-15% actually outperform – because of some sort of edge or skill that the fund manager actually has – that is still thousands of options.’
Another point to consider is cost. ‘One of the great things about passive investing is that the fees are lower,’ says Dan Kemp, Chief Investment Officer at Morningstar.
On the other hand, active investors don’t like to accept average returns, which is why they’re prepared to pay a slightly larger fee for the possibility of even higher returns.
They’re the ones who pack the crampons and sleeping bag for their next holiday.
Active investment managers also understand that the best way to protect and enhance returns is to adapt to changes in the market.
Unlike passive investments, which are tied to an index, active investment managers – and their investors –
aim to predict trends and have the flexibility to switch strategy in an instant if the markets take a turn for the worst.
YOUR CHOICE
Ultimately then, the choice of active or passive investing comes down to what’s best for you at a particular time and depends on several factors such as cost, financial goals, and risk tolerances.
It’s important though to point out that you don’t have to be one or the other; even committed explorers like to spend a bit of time relaxing on the beach, so why not choose both?
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45 DIY Investor Magazine | Jan 2018