Active versus Passive Management

Active managers try to outperform the market by stock picking and timing the market.  They beleive they can predict the future performance of stocks through various analyses and luck.  They are known to be more risky; one wrong prediction could possibly wipe out a lifetime of savings.  Facts show, over the long term, active managers can not consistently outperform the market.  

Passive managers invest based on a pre-determined plan set forth by the needs of the client.  They focus on a well diversified portfolio for the long term.  Passive managers do not try to time the market because they know it is impossible to consistently outperform the market.  Facts show that a well diversified portfolio that is rebalaced from time to time, can typically outperform an actively managed portfolio over the long run.  

Safe Harbor-AMS uses a passive management strategy.  After assessing the clients risk tolerance and goals, we will choose a well diversified portfolio that will best suit the client.  We plan for the long term and rebalance the portfolio from time to time to keep the portfolio in line with the clients goals. 

 

Scholarly Articles about Active versus Passive Management:

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Counseling clients: Why a passive investing approach still makes sense

In Indexing We Trust

Best Mutual Fund of the Decade: CGM Focus

4% withdrawal rule called into question

 

 

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