This week’s Around The World (ATW) looks at active vs passive investments. Both provide global diversification and both seek to generate returns for clients, but there are some notable differences. Attached is a link to a Globe and Mail article here which nicely describes the pros and cons of both. Fees, Risk, Returns and Volatility are important considerations when making investment decisions and will determine the overall investment experience.
All of these factors are wrapped in the emotional expectations of how your money performs once invested. After 26 years in this industry, I know this like I know my own name: the highest returning investment may not be the one that generates the highest return to the investor. How’s that you say?! Because if the investment is too volatile, the risk is that the investor sells before the investment has the necessary time to achieve it’s maximum return potential.
Passive investments are great when markets are up -particularly with their lower fee costs, but will investors stay the course when markets take a turn for the worst? Remember: passive investments get all of the downside. When it come to investing -and life- the motto Know Thyself comes to mind.
Hope you had a great Easter weekend. Spring is here! (at last)