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Active vs Passive Investing

Updated: Dec 18, 2022

RL146 — Active vs Passive Investing

On the Retirement Lifestyle Show, Roshan Loungani, Erik Olson, and Adrian Nicholson break down the differences between active and passive investing. They discuss how investors can choose the right strategy for their portfolio, the impact of the Fed's zero interest rate policies, and performance differences between active and passive investing.

[00:00] Introduction

[03:47] Active Versus Passive Investing

[06:35] What is Passive Investing?

[08:44] Breaking Down the Basics of Active Investing

[11:01] Factor-based Investing

[14:38] Active Management of a Portfolio and Why It's Important

[17:35] Exploring and Owning Equities Worldwide

[19:25] Performance Differences Between Active and Passive Investing

[20:18] Benefits of Passive Investing

[25:41] Disadvantages of Passive Investing

[29:01] Data on the Difference Between Active and Passive Investing

[34:08] Active vs. Passive Investing: Risk-Return Differences in Bonds

[37:37] Impact of the Fed's Zero Interest Rate Policies

[40:58] How to Choose What's Best For You

[44:20] Understanding ESG and Values-Based Investing

[47:20] Parting Thoughts

For more links and the full show notes keep scrolling down!

Roshan Loungani can be reached at or at 202-536-4468.

Erik Olson can be reached at or 815-940-4652.

Adrian Nicholson can be reached at or at 703-915-8905.

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Full Show Notes:

Active Versus Passive Investing

Active versus passive investing is the one topic that can pretty quickly turn into a heated debate among investors. Why? Because financial analysts and investors often strongly favor one strategy over the other and would willingly defend it to the death. And although passive investing is the more popular option for investors, there is still a strong argument to be made for active investing.

For active investing, the investor must adopt a hands-on approach and act as a portfolio manager. The primary objective of this type of portfolio management is to take advantage of the stock market's average returns and cash in on short-term price fluctuations. However, such a strategy requires expertise to know when to move in and out of a particular stock, bond, or asset class. On the other hand, passive investing is more of a long-term approach. Investors often limit buying and selling activities within their portfolios. Although this is a very cost-effective way to invest, the strategy demands that investors resist the temptation to react to the stock market's every move. Nonetheless, the investment approach you choose is irrelevant as long as you know what you're doing and make informed decisions every time.

Links and Resources:

Download the Morningstar semi-annual Active/Passive Barometer Report:

All opinions expressed by podcast hosts and guests are solely their own. While based on information that they believe is reliable, neither Arete Wealth nor its affiliates warrant its completeness or accuracy, nor do their opinions reflect the opinion of Arete Wealth. This podcast is for general informational purposes only, and should not be regarded as specific advice or recommendations for any individual. Before making any decisions, consult a professional.

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