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Forget Active Vs. Passive: Why Not Own Both Types Of Funds?

2 74 11
24.09.2021

Decades of research show the benefits of asset allocation using index funds. But new research suggests that many active strategies outperform over time, even after fees are taken into account.

Asset managers including John Hancock and Morgan Stanley have researched the active vs. passive question, as it's in their interest to determine the optimal return for their clients, balanced with the effect of management fees.

Unfortunately, all too often, that question is answered incorrectly. It's not an either/or proposition; the best long-term results come when you do both.

"Blending active and passive strategies can help investors outperform and pursue other important objectives while still being mindful of cost and tax efficiency," John Hancock analyst Leo M. Zerilli wrote in a white paper.

Active investing means putting your money into funds whose strategy is based upon managers' ability to pick investments deemed to have the potential to appreciate in value. In the past, active vehicles were exclusively the domain of mutual funds, but today it's easy to find actively managed ETFs as well.

In general, active managers strive to beat a particular benchmark. In addition, each fund has its own stated objective or philosophy.

For example, the Growth Fund........

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