The “Active versus Passive” investing debate is hotter than ever, particularly after BlackRock’s recent move to choose stock-picking robots over human fund managers. In a frenzy of online information, how does an everyday investor go about choosing a side? With iBillionaire, you may not have to.
First, let’s take a quick run-down of each side:
Active Investing: an active manager is one who selects individual stocks based on his or her own fundamental research or quantitative methods. These active fund managers are on a mission to beat a particular market index and often employ hordes of researchers to help them. Actively manged funds have the potential to beat the market for higher returns but they’re more expensive because you’re paying a premium for all this expertise.
Passive Investing: Passive is the opposite of active and the aim here is to try and match a market index, rather than to try beat it. Now you can see why passive investments are sometimes referred to as tracker funds or index funds. On the plus side, index funds are generally less expensive since you’re only tracking an index.
The Debate: Active management gives investment mangers the ability to outperform the market by actively picking stocks which they will believe will deliver the best performance. Index investing proponents believe however, that in the long-run most active managers are unable to reliably outperform the market and charge such a high management fee that it is often not worth the cost.
iBillionaire Strategies: With iBillionaire, you can get some of the benefits of both. Let’s take the iBillionaire Index for example: this index is based on the investment decisions of billionaires who have done their homework and are actively picking stocks that they believe will outperform in the market. The IBLN Index is rebalanced on a quarterly basis, in accordance with the 13F filings made by the billionaires it tracks. It’s certainly not as frequent as a fully fledged active fund manager but allows you some aspect of stocks being picked by some of the most knowable guys in the biz, all at a lower price of a typical index fund.
No matter which side of the fence that you sit on, the IBLN index could be a great pick to add to your portfolio. The great news is that you can easily auto-invest into the iBillionaire Index on a regular basis – get started here, from as little as $5.