Active investing passive investing

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					                 Active investing
                 passive investing
                 There’s no magic formula to ‘beat’
                 investment markets, but a combined
                 approach to investing, through active
                 and passive management could help.

                 When it comes to investing, there are two                  This has led to greater competition                        will discover there are active managers who
                 schools of thought: those that believe you                 and debate between the advocates of                        are above and below the index.
                 can ‘beat’ the market through careful stock                both approaches.
                                                                                                                                       Genesys has always maintained that high
                 picking and market timing (active investing)
                                                                            There are a number of advantages and                       quality active management coupled with
                 and those that believe you can’t.
                                                                            disadvantages to both approaches. Active                   passive investments provide the best of
                 Those that say you can’t beat the market                   managers offer the possibility of above                    both worlds and can lead to a successful
                 claim you should invest in the same                        index returns which of course index funds                  outcome for clients. Active managers
                 securities in the same proportions as a                    do not. The notion that active managers                    provide portfolios with the opportunity and
                 market index. This approach is known as                    can beat the index through a combination                   potential to exceed objectives, whereas
                 indexing. As no decisions are made about                   of research, skill, knowledge and experience               passive managers can be used to lower costs
                 which securities to buy and sell (you simply               makes logical sense to most investors.                     and as substitutes in asset classes where
                 buy them all via an index fund or Exchange                 Another advantage promoted by active                       active management does not have a good
                 Traded Fund), it’s considered a passive style              managers is their capacity to limit the extent             track record of outperformance.
                 of investing.                                              of market falls by actively changing the
                                                                                                                                       The ideal combination will largely depend on
                                                                            makeup of their portfolios to best effect.
                 According to Vanguard Investments, one                                                                                your own specific time horizon, preferences,
                                                                            Obviously index funds can’t do this either.
                 of the pioneers in index investing, active                                                                            investment goals and tolerance for risk. How
                 fund managers comprise about 90 per                        The fundamental advantage an index fund                    much to allocate to passive versus active
                 cent of the market. Passive investing made                 has over an actively managed fund is cost                  investment strategies is a complex decision
                 its appearance back in the 1970s and has                   (they are far cheaper) and the fact that                   that requires careful planning and execution.
                 emerged as a serious investment strategy                   active managers have an inconsistent record                Your Genesys adviser can discuss this with
                 since then. Its growing popularity has been                of outperforming the index (particularly                   you to ensure your future wealth goals
                 significant recently following widespread                  after fees) despite the advantages they claim              are achieved.
                 disappointment with active managers’                       to have. Performance tables provide all the
                 results during the global financial crisis                 evidence you need. At any given time you
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                 Genesys Wealth Advisers Ltd ABN 20 060 778 216 Australian Financial Services Licence No. 232686 Principal member of the FPA
                 Important information The information in this article is provided for illustrative purposes only and does not take into consideration your personal circumstances. You are
                 encouraged to seek financial advice suitable to your circumstances to avoid a decision that is not appropriate. Any reference to your actual circumstances is coincidental.
                 Genesys and its representatives receive fees and brokerage from the provision of financial advice or placement of financial products.

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