Passive versus active investing: which one is better?

The video explores the debate between active and passive investing strategies. Active investing involves fund managers selecting stocks to outperform market benchmarks, while passive investing aims to mirror index performance with lower costs. The video discusses the cost differences, popularity, and performance trends of both strategies, highlighting that passive funds have lower fees and have often outperformed active funds. However, recent trends show active funds gaining ground. The video advises viewers to consider their goals, risk tolerance, and consult financial advisors when choosing between active and passive investments.

What is the primary goal of active investing?

• To outperform market benchmarks

• To match the market index

• To invest in a wide range of stocks

• To minimize investment costs

Which of the following is a characteristic of passive investing?

• Selecting specific stocks to outperform the market

• High management fees

• Frequent buying and selling of stocks

• Mirroring a market index

Why have passive funds become more popular than active funds?

• They offer higher returns

• They have lower costs and fees

• They are less risky

• They are more flexible

How do lower fees in passive funds benefit investors?

• By providing access to exclusive stocks

• By increasing the number of stocks in the portfolio

• By allowing more frequent trading

• By leaving more money in the account for growth

What was a notable trend in the performance of active funds through June 2023?

• They consistently underperformed passive funds

• They had their highest success rate in years

• They matched the performance of passive funds

• They were more volatile than passive funds

What should investors consider when choosing between active and passive funds?

• The popularity of the fund manager

• Their personal investment goals and risk tolerance

• The historical performance of the funds

• The number of stocks in the fund

According to Morningstar, how do the cheapest funds compare to the priciest ones?

• They succeed more than twice as often

• They have lower returns

• They have higher fees

• They are riskier