Active vs passive: what’s right for you?

4 minute read

Active or passive investment management: which should you choose? It’s been an ongoing debate for decades with passive investing becoming increasingly popular since the mid-1990s. Yet while both have their merits, we firmly believe in the distinct advantages of active investment management. Here’s why.

Personalised investment strategies: The sweeter service

Imagine having your very own personal chef. They understand your tastes, dietary needs, and preferences. They craft meals specifically for you, ensuring each dish is perfectly suited to your palate.

That’s what our active investment managers do for your investments; they actively make decisions based on your unique wants and needs to develop your perfect portfolio. Want to focus on growth? Your investment manager can help you do just that. Prefer a more conservative approach? That can easily be arranged. Interested in responsible investment?

Your investment manager can implement ESG screening to filter investments based on your individual preferences, values or ethics, or screening out entire sectors (EG munitions).

Unlike passive management – which acts like a buffet catering to the general public – active management adapts to changing market conditions and your evolving needs, making the service that much sweeter.

Risk Management: The allergy alert

Not all investments are good for you. Like a personal chef who avoids ingredients that might cause an allergic reaction, your investment manager is always on the lookout to avoid investment decisions that may leave a sour taste in your mouth.

Active managers have the flexibility to respond to market volatility and economic changes, adjusting your portfolio to mitigate risk, protect against downturns, and seize emerging opportunities – and stop you from making decisions that you may regret.

Studies have shown that active managers tend to perform better during periods of market volatility. Professional knowledge and experience helps our investment managers to avoid common pitfalls that afflict many retail investors, such as exuberantly chasing overvalued stocks that are the hot new thing or selling into capitulation lows in a fit of panic. For example, during the market turbulence of 2022, active managers were able to adjust their portfolios to mitigate losses and capitalise on short-term opportunities.

Expertise and Insight: The culinary masters

Finding the perfect investment manager is like hiring a culinary master who has spent their career perfecting recipes and understanding flavours.

Our experts analyse market trends, economic indicators, and individual securities to help prevent impulsive financial decisions that could have long-lasting effects – a service not offered in passive management.

In 2022, certain sectors like energy and commodities saw significant gains. Active managers who had the flexibility to overweight these sectors outperformed passive indices that had a broader, more diversified exposure.

Our investment managers are also supported by one of the largest in-house research teams in the discretionary industry. Our 22-strong team of equity, fixed interest and collective (find) analysts has direct access to the management of listed companies and to managers of funds we invest in, giving us unique insights and investment opportunities.

Long-Term Focus: The health plan

A personal chef isn’t just focused on tonight’s dinner; they’re thinking about your long-term health. Similarly, our active investment managers help you achieve your long-term financial goals, rather than what can only be seen in the here and now.

We work closely with you to understand your aspirations, whether it’s saving for retirement, building an inheritance pot, or preserving wealth. We also have in-house wealth managers, who can provide forward-looking advice. Whether you’re looking to protect wealth, grow your investment or prepare for life’s important events, the support and expertise of a wealth manager or adviser will help you make the most of your money. This personalised attention ensures that your investment strategy aligns with your goals, providing a more holistic approach to wealth management.

Conclusion

Choosing between active and passive investment management is much like deciding between a highly qualified personal chef and a buffet. Both can yield results, but the care, attention, and expertise of a personal chef – or in this case a Quilter Cheviot investment manager – can transform your financial landscape into the perfect recipe tailored to your unique needs and aspirations.

Active management isn’t just about chasing higher returns; it’s about crafting a personalised strategy that evolves with you, navigating the twists and turns of the market with agility and insight. It’s about having a resolute partner who understands your financial goals and works tirelessly to help you achieve them, providing peace of mind and a sense of security in an ever-changing world.