Regardless which investing strategy that you employ, people simply want to make money when they are risking their hard earned cash. The two different types of strategies investors face are the active and the passive money management investments. These are both complete opposite techniques when it comes to investing, and each has its share of supporters promoting the benefits of using that technique to invest.
In simple terms, the active investing strategy is where you or your broker will look for certain conditions in the market that will present the opportunity for a favorable return on the money invested. This can range from timing the market and choosing the right sector or market to invest in. This type of investing does come with more risk, both the potential for a huge return with a larger percentage of return each year and the potential for a large loss.
On the opposite end of the spectrum you have the passive style on investing. This technique will be a more of a buy and hold strategy invested in different assets to try and reduce risk. These techniques can range from investing in the SP 500 or Russel 1000 as an index strategy. Or you could invest smaller amounts of money into hundreds of different companies to spread out and hopefully reduce risk. The return will mimic that of the market minus any fees incurred by the investing firm.
These two completely different investing strategies have both appealing and unappealing qualities, but those qualities are dependent on the investor and what makes them more comfortable in the market. If you enter the game at a much younger age, you can make many more risks and test which strategies fit your style and goals than if you were closer to retirement. If you use an active stance in investing and you make a mistake, you have plenty of time to recover from a loss. That being said, if you hit one really good stock you could make up for that loss in a very short period of time. The passive investing strategy appeals to investors who are approaching retirement because they can spread out their risks over many assets and hopefully reduce their risk. Evaluate where you are in your retirement goals with Foresight Wealth to determine which strategy you might benefit most from.
All securities are subject to market volatility and may produce gains or losses. Indices are unmanaged and cannot be directly invested into.