Every year, and this one too, there is the eternal dilemma of whether to use active or passive management in investment. As an option to make profitable savings in a more efficient way than before. It cannot be forgotten that at the moment the experts of the financial markets admit that no one is better than another. And it all depends fundamentally on the profile you present as a small and medium investor. But in any case, with a very clear objective and that is none other than trying to beat the benchmark indices. Something that is not always easy to carry out with complete success.
To apply this strategy in investment, the financial product you choose does not matter. It is true that in most cases it refers to the purchase and sale of shares on the stock market. But not only, but also to other models such as those represented by the Investment funds, indexed or even ETFs. What it is, after all, is that they are linked to equities. Regardless of its nature and the geographical area where you are going to make your checking account balance grow. It is something that you should keep in mind in your relationships with the complicated world of money from now on.
In any case, before opting for active or passive management, you will have no choice but to know what your closest goals are. Because depending on them, you can use one or another strategy to make the savings profitable. The difficulty will be generated by the fact that you can accept their approaches. Because they are completely opposite and they can lead you to make the odd mistake. But above all, respect the terms of permanence, which of course have them like other different management systems.
Active management: what does it bring you?
First of all we are going to refer to this way of managing your savings. Well, it is the most flexible of all. Among other reasons because it can be adapted to all the scenarios presented by the financial markets. Even the most unfavorable and inviting to stay away from any kind of investment. Because in fact, if active management is characterized by something, it is because there will always be a product or financial asset where you can save your money from now on. Even through fixed income models, such as bonds and public debt. Because what it is about is to take advantage of business opportunities.
Active investment management, on the other hand, requires you to delegate responsibility to other people. Although it is true that you yourself are in a position to manage personal or family assets. With the condition that you will have to review the investment portfolio from time to time. Between two or three times a year at least and to obtain the desired results from the beginning. You have to assume the role of at any time and your investment situation may vary. Accepting the new circumstances imposed by the financial markets.
Some of its main advantages
Of course, active investment management brings you a series of benefits that you need to know. Do you want to know some of the most relevant? Well, pay attention from now on because you may need them at some point in your financial life. And in this way, you can get a better return on almost all the operations carried out in the markets. Whatever their nature and the origin of the financial assets. Among those that stand out the following that we expose you below.
- You will be in a much more advantageous position to adapt to all scenarios. Even what is unwanted by you and how much you fear for the repercussions that they may generate in your income statement.
- It is an investment model more flexible than the liability. Reason must be found in the ease that it can take you from one financial asset to another. Especially when things don't go the way you expected from the beginning.
- You can open yourself to all kinds of financial or savings products. They do not have to be directly linked to equities. Of course not, but you are also in a position to turn to other financial assets of an alternative nature.
- It has a very positive effect for when things don't look as good as you wanted at first. Not surprisingly, active management is distinguished because you can vary the investments at any time. Even with a radical change in your investment portfolio.
- A basic requirement to successfully develop active management is that you have the money fully diversified. That is, in two or more products of different conditions. Never in a basket of stocks or a specific product, as many investors with less experience in financial markets do. Both equity and fixed income.
Passive management: more limited
With regard to this way of managing savings, it has its own rules of action. Sensibly different from the active one. And what do they do? be more static in the open positions in the financial markets is a reality. Either way, there are always constants in this kind of savings management. That go through some of the following lines of action. The clearest is that your money will always be in the same place. Go bad or good the evolution of the financial markets.
Another of the most relevant characteristics that defines what passive management is is that you will not have to bother to change or vary your investment portfolio. It is a very favorable situation for when things go well for you and you can earn money little by little. Especially in bullish scenarios in any of the financial assets that you have chosen to accommodate your personal or family assets. As you may have seen, it is an investment model that is specially designed for the most conservative user profiles. They prefer to hold their positions above any variation in their management strategy.
Particularities of this management
Unlike active management, it is more limited in its effects. As for example, it can make you lose money at any time and situation. Shortly after the general trend of financial markets goes from bullish to bearish. It is another reason why it is especially indicated for longer periods of stay. Where you do not have to worry about what may happen to you in the shortest term. On the other hand, this kind of investment management is more predisposed to more conservative products. Among which is included the purchase and sale of shares on the stock market.
Despite the belief of a good part of small and medium investors, this model is not in crisis. Some of the most important managers of the moment believe that at this time a significant volume is beginning to occur on the part of passive management. One of the models where this market sentiment is transferred is in investment funds. Both linked to equities and fixed income and even accepting alternative or mixed funds. On the other hand, something normal in expansive periods or at least with an upward trend in the equity markets.
Passive management constants
So that you can see what you can find with this management model in saving users, nothing better than detecting their most relevant identity signs. Some of them are as follows.
- El immobility investment is the general trend of all actions. There are no grounds for rectifications, not even slight tweaks to the portfolio.
- You have to have an idea where to invest the money and continue in it whatever happens. Even if there are times when you lose something or a lot of money. What it is about is to be consistent with some investment principles.
- Requires less financial literacy than through the other management model. Basically most of the small and medium investors. They are necessary to carry out transfers between products of any nature. In this sense, your position will always be more comfortable. Among other reasons because you will not have to do absolutely anything.
- One of the keys to being an effective system is to choose a class of investments that are not overly committed. Neither in high risk products in their positions, such as warrants or derivatives.
- This investment can be as profitable as the others. The key to success depends on the trend that show the chosen markets each time. Because a bad selection can make you lose a lot of euros along the way. As you have seen on more than one occasion. Yes?