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Finance: What are Active Investing and Active Management? 4 Views

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What are Active Investing and Active Management? Active investing means exactly what it sounds like. The investor is actively buying and selling, as well as keeping track of their performance and seeking investment strategies. Active management is the same thing, but in this case it’s not the investor doing all of the work, it is a fund manager or financial advisor.

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Transcript

00:00
Finance a la shmoop.. what are active investing and active management? Active
00:09
doing something, active as in trying to beat the market by trading stocks active [People riding a bike on stock market appears on board]
00:15
as in humans making decisions often with the help of computers trying to beat
00:20
their index or the overall market ie the S&P 500 that's what we mean by the
00:24
market active; investing.. active; management okay

00:29
passive just passive.. active is what hedge funds and mutual funds and any
00:35
kind of funds that have a strategy do they actively try to invest money such
00:40
that the performance of their portfolio does better than whatever index or
00:45
benchmark it's measured against and notice were not talking about after-tax [Man discussing active investments]
00:50
performance here because remember every time you trade in a taxable account
00:54
while the attacks men cometh but we won't go there right now..... Your benchmark
01:01
compare is versus the S&P 500 and you manage a broadly based mutual fund the
01:07
passive investing cousin in this investment is an index fund think ticker
01:13
SPY, that's the biggest S&P 500 index fund well index funds are not actively
01:18
managed they are passively managed they just sit there and get tweaked a little [Pile of money grows larger overnight]
01:23
bit each year or really each quarter to kind of mirror the S&P 500 or whatever
01:28
their index is supposed to mirror but they just kind of sit there there's no
01:31
human trying to beat the market they are the market index funds are the
01:35
market and yeah 99% of actively managed funds don't beat the market over any
01:42
extended period of year like five or ten years very few ever beat the market and
01:47
essentially none of them beat the market after taxes so then why would someone
01:51
invest in an actively managed mutual fund when they're paying taxes and
01:56
they're thinking about an index fund as a comparable well basically they're one [Mutual funds on a table and a lollipop appears]
02:00
of these so yeah don't be one of these guys
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