Active Investing
Active investing involves trying to outperform the market by selecting investments that are expected to do better than average.
What it means
Active investing involves trying to outperform the market by selecting investments that are expected to do better than average. Decisions may be made by a professional fund manager or by an individual investor.
An actively managed fund researches companies and chooses which ones to buy or sell in an attempt to beat its benchmark.
Why it matters
Understanding active investing helps you weigh the potential for higher returns against higher costs and the possibility of underperforming.
Some active managers beat the market, but many do not over long periods.
Is active investing better than passive investing?
Neither is always better. Each approach has advantages and disadvantages depending on costs, objectives and outcomes.