CHAPTER 10

ACTIVE OR PASSIVE?

‘I don’t try to be clever at all. The idea that I could see what no one else can is an illusion.’1

Daniel H. Kahneman, Nobel Laureate 2002

Once you have a good idea of your overall wealth plan and asset allocation policy you will need to make a third key decision: should you pursue an active or a passive investment approach or a combination of the two? Figure 10.1 sets out the key characteristics of each approach.

Figure 10.1 The three investment management approaches

Figure 10.1 The three investment management approaches

Source: The Vanguard Group.

Active investment management

Active investment management is where a manager (or investor) aims to beat, rather ...

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