Active Versus Passive Investment For Retirement

If you’ve read our previous blog about diversifying your retirement investment portfolio, then you know why investing plays a critical role in what retired living looks like for you. In this article, our retirement financial advisors based in Dallas and Fort Worth expand on retirement investment. We’ll compare active and passive investment methods and discuss which is the best addition to your retirement planning strategy.

What Is Active Investing

As its name implies, active investing means that the investor takes a very direct and active approach to investing. If you’re an active investor, you need someone you can trust to serve as your portfolio manager. This approach requires extensive knowledge about investments and investment strategy, as well as a team behind you that can encourage the success of your investments, especially because they are usually short-lived to maximize earnings at the right time.

What Is Passive Investing

Passive investing is usually a long-term investment method. In this case, if you’re an investor, you likely won’t try to invest and then sell at the right time over and over. Rather, you as the investor would prefer to keep the investment and let it grow without nearly as much intervention or strategy behind it.

Pros And Cons Of Active And Passive Investment For Retirement

When you’re working on retirement planning, the right investment portfolio makes a world of a difference, which is why our Dallas retirement financial advisors in Fort Worth and Colleyville recommend you consider the pros and cons of each.

Pros And Cons Of Active Investing

Pros:

• Active investing is more flexible because they don’t require following an index
• Active investing enables our clients to enter and exit as they please

Cons:

• A retirement investment portfolio fully comprised of active investment is expensive
• Active investments are associated with higher risk and potentially high returns, but very bad losses

Pros And Cons Of Passive Investing For Retirement

Pros: 

• Passive investing is lower in cost than active investing
• Because passive investors are following an index, it is clear at all times what assets are present

Cons:

• Passive investments are limited to the index, so investors are tied to them regardless of market conditions
• Their lower risk is also associated with lower returns

Should Your Retirement Investment Portfolio Be Made Up Of Active Or Passive Investments?

At this point, you might believe that it is ultimately up to your preference. While there is some truth to this, our Dallas financial planning experts recommend that your retirement investment portfolio consist of a healthy blend of both active and passive investments. This way, you can get the most out of investing while remaining comfortable about your assets and their levels of risk.

Ready To Improve Your Retirement Investment Portfolio? Our Colleyville Financial Advisors Are Ready To Help

If you would like to take a look at your portfolio, understand its performance, and/or make some adjustments to it, please contact us so that, together, we can encourage your retirement investment portfolio to provide the income you need to live your best retired life.