Selection Strategies Copy

The choice between active and passive investing can also hinge on the type of investments one chooses.

Passive management generally works best for easily traded, well-known holdings like stocks in large U.S. corporations, says Smetters, because so much is known about those firms that active managers are unlikely to gain any special insight. “You should almost never pay for active management for those things.”

But in certain niche markets, he adds, like emerging-market and small-company stocks, where assets are less liquid and fewer people are watching, it is possible for an active manager to spot diamonds in the rough.

It’s a complex subject, especially for high net worth investors with access to hedge funds, private equity funds, and other alternative investments, most of which are actively managed. Participants in the Investment Strategies and Portfolio Management program get a deep exposure to active and passive strategies, and how to combine them for the best results.

[SW] By comparison, institutional investors investing for the mid to longer term will be better served by investing passively.