Active vs. Passive investing styles is an age-old debate in the investing world. Investment managers on either side tend to be steadfast advocates of the merits of their approach. Active managers seek to exploit market inefficiencies by relying on analytical research, forecasts, and their own judgement and experience to decide which securities to buy, hold, and sell. Passive investing involves simply tracking an index to avoid the management fees and trading costs that can be a drag on performance by adhering to a buy-and-hold strategy.
Surprisingly, although the S&P 500 Index celebrated its 60th anniversary this year, the first S&P 500 index fund wasn’t introduced until August 31, 1976 by Vanguard founder Jack Bogle. Due to the popularity of passive investing, low-cost index funds have moved far beyond just tracking the S&P 500.
In Active vs. Passive Investing Styles: An Age Old Rivalry, SBS traces the origins of the active and passive investing styles, dives into the historical performance and asset flow trends of each, and addresses how plan sponsors can make prudent decisions about employing each investing style.
If you have any questions, or would like to begin talking to a retirement plan advisor, please get in touch by email or by calling (855) 882-9177.