FYI: Investment fund strategies can broadly be divided into either active management [1] or passive management [2]. The former refers to funds actively managed by financial professionals who typically try to outperform a given benchmark, while the latter describes funds that seek to track a particular index.
For most investors, deciding on whether to use active or passive funds is largely a matter of faith or disposition. Occasionally, the debate becomes surprisingly impassioned, which often leaves people slightly amused, as investment professionals get in a froth about arcane topics such as tracking error [3] or information ratios [4].
However, while somewhat esoteric, the topic is not irrelevant. Over the long term, implementation, i.e. how you choose to use active and or passive funds in your portfolio, is a critical driver of investment returns.
While the debate between active and passive will never truly be settled, investors can sidestep the acrimony and embrace a simple approach that blends both to help build a better portfolio [5]. That of course leaves the question of how and when to combine active and passive. Here are five criteria to consider as you’re figuring out the right blend for you.
Regards,
Ted
http://www.blackrockblog.com/2014/08/22/active-passive-blend-aspects/print/
