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January 20, 2019updated 04 Apr 2019 4:45pm

Understanding active investing versus passive investing

By Ronan Mccaughey

The aim of an actively managed fund is to beat the return from a particular market index or another defined benchmark.

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How attractive are current investment opportunities in Europe?

Europe has been identified as one of the most favorable regions for investors, seeing high investment activity in the past year. Most of these investments have been through Debt Offering, valued at close to $700 billion. The region has provided attractive investments in a diverse set of companies. Companies who tend to major themes such Digital Media, Cloud, Artificial Intelligence, E-commerce, and Big Data are recording the highest number of deals, with Digital Media recording close to 2,000 deals. However, GlobalData’s whitepaper offers a full view of the market, analyzing less successful or attractive points of investment as well, examining statistics on Equity Offering investments and PE/VC deals. Understand how government agencies for economies around the world use GlobalData Explorer to:  
  • Track the M&A and Capital Raising volumes into their target market
  • Identify the top sectors in the target market attracting the investments
  • For any investment segment, identify the top Investors inside and outside the target economy that are already investing in the Segment
  • Assess and showcase the growth potential for various Industries in the target economy
Don’t miss out on key market insights that can help optimize your next investment – read the report now.
by GlobalData
Enter your details here to receive your free Report.

Investment company Vanguard says fund managers who use an active investment approach aim to either outperform a given equity or bond market, often represented by an index, or to achieve a specific investment objective.

Vanguard notes that managers can also adjust their portfolios to minimise potential losses. For example, they can avoid individual shares or bonds, sectors, industries, or even countries which they believe may underperform over a certain period.

Active investing vs passive investing: Differences and benefits

Active managers use different styles of investing. Vanguard explains that value managers seek to buy companies whose shares are currently selling for less than their net asset value (their total value after any debt and other liabilities have been deducted), or where they believe future earnings potential has been underestimated.

Growth managers, meanwhile, look for companies which have exceptional potential to grow, and to increase their share price over the longer-term.

Passive investment is the opposite of active management. According to Vanguard, passive managers generally believe it is difficult to out-think the market, so they try to match the performance of the market (or their chosen sector) as a whole.

They tend to do this by closely following or tracking an investment index, such as the FTSE 100 Index of the UK’s biggest 100 companies.

That’s why passive investments are often called index funds or tracker funds. These have a simple, precise objective: to match a specific index, rather than try to beat it.

Passive investing also keeps management costs low. There is no need to research companies or bonds, and transaction costs are reduced because securities are bought and sold much less frequently.

Free Report
img

How attractive are current investment opportunities in Europe?

Europe has been identified as one of the most favorable regions for investors, seeing high investment activity in the past year. Most of these investments have been through Debt Offering, valued at close to $700 billion. The region has provided attractive investments in a diverse set of companies. Companies who tend to major themes such Digital Media, Cloud, Artificial Intelligence, E-commerce, and Big Data are recording the highest number of deals, with Digital Media recording close to 2,000 deals. However, GlobalData’s whitepaper offers a full view of the market, analyzing less successful or attractive points of investment as well, examining statistics on Equity Offering investments and PE/VC deals. Understand how government agencies for economies around the world use GlobalData Explorer to:  
  • Track the M&A and Capital Raising volumes into their target market
  • Identify the top sectors in the target market attracting the investments
  • For any investment segment, identify the top Investors inside and outside the target economy that are already investing in the Segment
  • Assess and showcase the growth potential for various Industries in the target economy
Don’t miss out on key market insights that can help optimize your next investment – read the report now.
by GlobalData
Enter your details here to receive your free Report.

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