Investment FAQ – What is a Passive Investment Strategy as opposed to an Active Strategy?
Simply put, a passive strategy is one which aims to achieve the average investment returns of its particular asset class. An example of a passive equity strategy would be an investment that aimed to mirror the ASX200 Australian share-market index.
Passive strategies tend to be lower cost and aim to allow the investor to benefit from the inherent returns of that particular asset class over time.
In being passive, there is little or no trading done and hence returns are not tarnished by transaction fees incurred.
An active strategy is one in which the investor aims to use skill and nous to beat a particular asset class index. By actively managing a portfolio over time, the investor aims to achieve returns above those achieved by the index.
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