personal finance

5 differences between active and passive investing

1. The goal of active investing is to beat the market index whereas the goal of passive investing is to get market returns.

2. Active investing is a hands-on approach with frequent buy-sell decisions making most of information flow and price fluctuations whereas passive investing is about researching, buying and holding the investments.

3. Active investing has higher transaction and research-related costs as compared to passive investing.

4. Active investing can also lead to higher capital gains taxation as compared to passive investing.

5. Active investing carries higher risk and potential to generate higher returns as compared to passive investing.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)


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