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?
“Active vs. Passive Management” in Mutual funds, from the Financial Industry Regulatory Authority
Correlation: How investment balance can shift, a Money Talk Video with Kyle Tetting
As our financial lives evolve, we often wonder at what point or how frequently to take certain actions toward our long-term goals. In an ongoing feature, investment advisors from Landaas & Company provide answers.
(initially posted Aug. 30, 2017)