In the world of investing, there are two main ways your portfolio can be managed: actively or passively. Both of these investment philosophies can be beneficial to your overall retirement planning experience, but it’s important to understand the difference. Here we’ll be discussing active and passive investment management and their uses.
Active investment management simply means your portfolio has a benchmark that is trying to be met. That benchmark could have the goal of beating the S&P 500 or another index. This is an ambitious strategy with the goal of working toward growth.
An active investment management approach typically comes with higher fees. While you’re chasing after a great return, it’s important to bear in mind that your return will have to beat out your benchmark index as well as the fees you’re paying.
Passive investment management takes a look at a benchmark index and just tries to mimic it. With a passive strategy, you won’t have the high fees that are associated with active investment management.
The important thing to note with both of these investment strategies is they have a goal in mind. When you plan for retirement, your investments should have an end goal that reflects your retirement needs and objectives. If your financial professional isn’t trying to meet or exceed some kind of benchmark, it may be time to start asking questions. If you’d like to see how Hoffman Financial Group can help you decide what investment management strategy works for your retirement plan, contact us today.