Comparing Active and Passive Investment Strategies

Finding The Right Investment Strategy


Today I want to talk about the differences between passive and active investment management strategies. 

A Passive investment strategy is designed to maximize returns by minimizing buying and selling.  Investing in the S&P 500 index is one common passive investment strategy, where an investor buys into the index and will hold it over the long haul. Passive management simply replicates a specific benchmark or index in order to match its performance. 

Active investing, on the other hand, involves ongoing buying and selling activity of stocks and ETFs.  Active managers purchase investments continuously and monitor their activity to try and exploit profitable conditions. So, active managers buy and sell positions inside a defined investable universe with the objective being to outperform a relevant benchmark or index and have a more hands-on approach to investment goals.

There are a couple of advantages of active management investments, especially when you are working with a financial advisor:

Risk Management – An advisor should adjust your portfolio to align with the current market conditions. This involves staying in contact with you to make sure your investments reflect your risk tolerance as your life changes or as there are changes in the market.

Maximizing Investment Goals – An advisor needs to constantly be working towards meeting the specific needs of each client such as providing diversification, retirement income or even trying to be opportunistic with your investment portfolio.

At Safe Harbor Wealth Advisors, we are active investment managers.  We have a strategic partnership with Gradient Investments to help us manage our clients’ portfolios.  Every portfolio we manage has a distinct set of mandates and objectives that defines its investable universe. Each portfolio also has its own relative benchmark used to measure the effectiveness of our active investment process and of the portfolio manager.

Here are the 2020 end of year performance numbers for a few of our portfolios.  The burgundy bars represent the Gradient Investment portfolios, the gray represents their relevant benchmarks. As you will see, Gradient Investments are beating their benchmarks for the year 2020, arguably one of the most volatile stock markets we have seen in some time.

Safe Harbor can create an active investment strategy

So, whether you are trying to grow, preserve or generate income  with your investment strategy, Safe Harbor Retirement Group can create a unique, long term investment solution  tailored for you. If you have any questions or want to learn how our active management strategy could benefit you, call us at 614-760-0670  to set-up a complimentary meeting with me.

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