The arguments for passive investing include reduced costs, tax efficiency, and the fact that historically, passive funds outperform a majority of active funds. The arguments for active investing are that there are Anomalies in securities markets that can be exploited to outperform passive investments and the fact that many investors and managers have outperformed passive investing for long periods of time. General Equity Funds outperformed by the Wilshire 5000 index. The active versus passive decision does not have to be a one or the other decision. In fact, a common strategy is to invest passively in asset classes considered to be very efficient , and invest actively in asset classes considered to be less efficient .
Investors can also invest actively in sectors in a passive manner.
For example, you can invest in an index fund of small stocks if you think small stocks will outperform large stocks, or you can invest in a passive country fund if you believe a particular country will outperform the rest of the world. Mutual funds, individual securities, or others. A major advantage of mutual funds is that they provide diversification within the asset class. Stocks, bonds, and Real Estate Investment Trusts can also be purchased individually through Stock Brokers . Private funds are primarily used by institutional investors to invest in Venture Capital and Alternative investments.