August 27, 2012

                There are two different types of investing camps: passive and active. There are two types of active investor camps: actively managed mutual funds and individuals who buy their own stock. Some people go to financial advisors who then invest their money in a bunch of actively managed mutual funds who then buy and sell stocks for said fund. The funds have costs associated with them, usually like a sales fee or commission.  The second type of active investor is the individual who buys his own stock. His stocks are usually less diversified and they compete with full time professional traders. Passive investors own virtually every stock on the market and passive funds usually charge significantly less than active funds.

                I personally think that in the long term it would be better to invest in passive funds rather than active ones because there is less risk because active funds aren’t always successful. My dad agreed with me. He said that he once invested in an active fund and immediately regretted it because it wasn’t a very good one. When I researched this topic, I found that people involved with passive funds think its better and the ones who are involved with active funds think that's better. The only difference is that investing in active funds is riskier since active management tries to beat the market and they aren’t usually able to do it.