Investing 101
1:13
What is Active Investing? | Active Investing Explained
Active investing is a hands-on approach that gives investors more control. Learn more about active investing from Titan's Emily Cherkassky.
Video Transcript
As the name implies, active investing is a type of investing that requires an active hands on approach and active portfolio management. It involves researching, buying and selling investments with the goal of outperforming the market indices like the S&P 500 or the Russell 2000. As an alternative to passive investing in indexes, active investing may look at qualitative or quantitative factors to construct a portfolio comprised of attractive investments that are expected to beat the benchmark.
The pros of active investing include greater investment personalization and flexibility, as well as the potential for higher returns. Because of these potentially higher returns, actively managed investments may come with a higher fee than their passive counterparts. Some argue that markets have become so efficient that the benefits of active investing have been arbitraged away, meaning that markets and trading have become so fast that there's not much to take advantage of. But there should always be opportunity in markets where participants have varying investment horizons and expectations. While it might be difficult, the best active managers will find those opportunities in order to beat the market.
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