Active investment, passive investment: should you really choose between the two?

Active investment, passive investment: should you really choose between the two?Many novice investors wonder which is the most profitable investment method between passive investing and active investing.
But ultimately, why should we necessarily choose?

Investing passively:

By definition, passively managing a stock portfolio requires very little time from its owner.

The stocks chosen generally belong to solid companies that have a history of paying dividends regularly to their shareholders.
These companies have demonstrated over the years that they are perfectly capable of withstanding economic storms by knowing how to adapt their policies when necessary.
Even the most cautious investors consider them to be rather safe values and therefore do not hesitate to add them to their portfolio.

Some of their choice, passive investors, very often fans of stock picking, then only have to let their securities work for them and bring them a minimum return for years without having to buy or sell constantly.

The money thus generated is then used to purchase new securities, in order to take full advantage of the magic of compound interest.
This method is extremely intelligent and is part of the strategy used by the greatest investors on the planet, such as Benjamin Graham and Warren Buffet.

Invest actively:

Active investing is not suitable for all investor profiles.

His involvement in the management of his portfolio is considerably greater.
The composition of its portfolio is regularly revised based on various factors, whether technical or fundamental.
The market is constantly changing, and knowing how to adapt your investments accordingly is a great advantage for the active investor.

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Since the exercise is much more intensive, but also riskier than passive management, the experienced investor can also obtain a higher return from it.
But the goal of active investing is, contrary to what many think, also to generate regular income over the long term.
But instead of relying on a handful of stocks that he buys and leaves alone, he buys and sells based on how the market is doing.

The main difference between the two types of investors is found here: one seeks a return that is neither too low nor too high, but regular and independent of market developments.
The other, on the contrary, depends on the evolution of the market, to generate a higher, but equally regular, return.

Should we choose between the two?

The ability to choose between the two types of investments does not mean that one is better than the other.
Since both strategies have an equal share of advantages and disadvantages, it is entirely possible to defend them, as well as to criticize them.

It's a bit like pitting two people against each other, one of whom prefers blue and the other prefers green. How could one say that one colour is better than the other?
Here, it's the same thing: it must be seen as a possibility for the investor to choose the method that best corresponds to his profile.

The existence of two systems that work (in both cases, there is no shortage of examples of successful investors) and therefore rather a stroke of luck.

Do you absolutely have to choose between the two? Not necessarily. There is nothing to prevent you from creating different portfolios, each managed using a different strategy than the others.

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The real question then would be… if several methods work, why deprive ourselves of them?


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1 thought on “Investissement actif, investissement passif : faut-il vraiment choisir entre les deux ?”

  1. Martin the independent investor

    For my part, I completely agree that there are several winning investment methods.
    As highlighted in the article, the important thing is to choose a method that is in harmony with oneself.

    Martin

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