Although typically costing more than passive index funds, active management sometimes can have an edge, including:
- When you need experienced stock pickers, when securities are not all moving in the same direction, such as the later growth stages of a business cycle when undervalued stocks are harder to find
- When you invest in sectors that are more difficult to cover with an index, such as small-cap and international stocks
Active funds allow managers more flexibility to adjust for potential risks. Still, investors need to carefully research managers whose performance has the potential to be worth their fees.
Contributing: Mike Hoelzl
Learn more:
When Should I …consider passive index funds?
What You Need to Know About the Passive vs. Active Management Debate, from the Financial Industry Regulatory Authority
“Active vs. Passive Management” in Mutual funds, from the Financial Industry Regulatory Authority
A place for active management, a Money Talk Video with Marc Amateis
Talking Money: Active management, a Money Talk Video with Kyle Tetting
Correlation: How investment balance can shift, a Money Talk Video with Kyle Tetting
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