Buy and Hold

Active Versus Passive Management

The debate over passive versus active management styles persists. A buy-and-hold investor reflects a passive management style. In the case of a mutual fund or exchange-traded fund, indexed portfolios mirror that of a common benchmark.

As indices rebalance and weightings increase relative to market capitalization, turnover rates, which are often under 5% among passive funds (such as an S&P 500 Index portfolio), remain ultra-low as managers focus on issues across the broad market. Stocks are held for as long as they remain components of the indices.

Leave a Reply

Your email address will not be published. Required fields are marked *