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Active vs. Passive Investing: Which Works?

February 21, 2014

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In this episode Brian and Bo dig into the active vs passive argument. It seems like there is a constant battle among investors and advisors about their stance on active and passive management. Brian and Bo share their opinions and give a behind the scenes look of their investment philosophy.

It is no secret that the U.S. equities market “knocked the ball out of the park” in 2013. That is not to imply that it is time to dump all of your money back into the market. This week we are hopefully going to put this argument to rest (for now). While you are listening to this episode it is important to remember that, “there is more ways than one way to skin a cat.” The guys base the show around an article from Morningstar, Where It Pays to Be an Active Fund-Picker, by: Lee Davidson.

Investopedia defines Active, Passive, and Index Investing as follows:

Active: An investment strategy involving ongoing buying and selling actions by the investor. Active investors purchase investments and continuously monitor their activity in order to exploit profitable conditions.

Passive: An investment strategy involving limited ongoing buying and selling actions. Passive investors will purchase investments with the intention of long-term appreciation and limited maintenance.

Index: A form of passive investing that aims to generate the same rate of return as an underlying market index. Investors that use index investing seek to replicate the performance of a specific index – generally an equity or fixed-income index – by investing in an investment vehicle such as index funds or exchange-traded funds that closely track the performance of these indexes.

Brian and Bo use this podcast to explain their thoughts on the different investing styles as well as when and where to put each of them to use. This week’s show is a great place to start when designing your portfolio and gives you a “peak-behind- the-curtain” at the guy’s view on the investment selection process.

Don’t forget to go check out our Twitter feed to get more frequent access to us as well as sneak peeks and behind the scenes looks at The Money-Guy Show.

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