Active vs “Passive” Investing

There are very few times you could say investing is “simple”. Often consumers are left bewildered by the complex terms, products and market forecasts that you often feel you need 3 university degrees to decipher. What you probably won’t figure out is that there are two types of investing: active and “passive” (indexing).

Index Funds
  • Index funds that simply follow the movement of the market
  • Generally cost far less, usually below 1% per annum
Active Funds
  • Active funds that are managed daily, with multiple decisions taken on how, what and where to invest your money
  • Each time a decision is made, a trade is made or money moved, there are costs involved

But how do you choose between the two?

Simple really: According to SPIVA, the majority of active fund managers in SA have underperformed low cost index funds, after fees, over the last 5 years.

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Make the simple choice and don’t let someone gamble with your money