Active vs. passive investing
Investing means putting money into various
in the hope of earning more money over a period of time. A
distinction is made between active and passive investing.
Active investing involves making conscious decisions. Particular securities are bought or sold at a selected time. The goal of active investing is to outperform the stock market, and it implies high potential gains – but also higher risk. The most common methods are “stock picking” and “market timing.”
Passive investing is about betting on the market and adapting to market trends. No individual stocks are selected, and thus no complex analysis is required. This makes this investment option accessible to people who are not stock market experts. The results of 60 years of empirical financial market research show that passive investments perform better after all fees.
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