When it comes to growing your money in the stock market, you have two main strategies from which to choose: active investing and passive investing. Each has its own style, goals and level of involvement.

banner your financial health michelle sarna

Active investing is like being the chef in a kitchen, you pick the ingredients and adjust the recipe to try to get the best result. In investing terms, this means a portfolio manager (or individual investor) buys and sells stocks frequently, trying to take advantage of market changes and outperform the market. Active investors do a lot of research. They analyze companies, trends and global events to decide when to jump in or out of investments.

This hands-on strategy offers the potential for high returns, especially in volatile markets where skilled investors might spot opportunities. But it comes with higher fees; those research tools and expert managers cost money, and as for beating the market consistently? It’s really hard, even for the pros.

Passive investing, on the other hand, is about keeping things simple. It is more like setting your GPS and letting it guide the way. Instead of trying to beat the market, passive investors try to match it. They often invest in index funds or exchange-traded funds (ETFs), which mirror the performance of market indexes like the S&P 500.

This strategy tends to have lower fees, because it doesn’t require constant buying and selling. It’s also more tax-efficient and less stressful, since it focuses on long-term growth rather than quick wins. With passive investing, you’re not trying to pick winners, you’re just trying to capture the average return of the entire market over time.

So, which is better? That depends on your goals, time and risk tolerance. If you enjoy research and want a shot at higher returns, active investing may be worth exploring. If you prefer a low-maintenance, cost-effective way to grow wealth over time, passive investing might be your best bet.

Many investors combine both approaches to balance risk and reward. Whichever path you choose, the key is consistency, patience and keeping your long-term goals in sight. Investing isn’t about overnight success—it’s about smart decisions that add up over time.

Michele Sarna is a certified financial planner with Beacon Pointe Advisors and can be reached at (760) 932.0930 or msarna@beaconpointe.com.

Provided as information only and should not be considered investment, tax or legal advice or a recommendation to buy or sell any type of investments. Asset Allocation, portfolio diversification and risk strategies cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Form ADV contains important information about Beacon Pointe Advisors, LLC, and may be viewed at adviserinfo.sec.gov. This document has been prepared with the assistance of Microsoft Copilot, an AI-powered tool designed to enhance productivity and provide support in drafting, editing and organizing content. Microsoft Copilot leverages advanced AI models to generate text based on user input. Although Copilot generates original content based on user input, there is a risk that the generated text may inadvertently resemble existing works that may not be properly cited.  

Read or write a comment

Comments (0)

Columnists