There are two broad approaches to investing in the stock market. They are active investing and passive investing.
You are active investing if you take the liberty to select stocks yourself. It also encompasses mutual funds and hedge funds, where a fund manager selects stocks on your behalf.
Passive investing usually refers to index funds, which spread your money across a wide variety of companies on the stock market. There is not nearly as much discretion involved.
Is it better to be an active or a passive investor? Robert Rohil gives the answer in this video, filmed at the Platinum Mastermind in the Canary Islands.
If you are an active investor, you think you can select stocks and instruments that will outperform the market average. You think you have a magic touch.
Or, you have been seduced by a smooth talking fund manager who tells you they can outperform the market and they have a magic touch.
This is not to say that all active investors are frauds. Warren Buffett has averaged a 20% return over the years, double that of the S&P 500. However, for every active investor who knows what they’re doing, there are plenty more who don’t.
Passive investors are humble. They admit that they’re not experts and they can’t predict which stocks are going to outperform the market.
Instead, the passive investor chooses to invest in everything, through an index fund. They will also pay the lowest cost because there is not as much management involved in an index fund than a mutual fund.
The active investors think they will outperform the passive investors, but the passive investors will outperform most of the active investors by default.
The active investors will take on too much risk and allow their emotions too much involvement. Because of this, many of them will suffer losses that the passive investors are protected against.
THE BEST WAY TO INVEST
As far as investing in stocks is concerned, it’s safer and less expensive to opt for index funds than mutual funds. Still, don’t put all of your money into the stock market.
Invest your money into a mix of index funds, bonds and precious metals. The older you get, the less of your money should be in the stock market and the more should be in bonds and cash. Older investors need more security and have less time on their side.
The MOBE Platinum Mastermind is where the most experienced mentors in investing and asset protection share their investment methods with fellow members. To learn more about the Platinum Mastermind, click HERE.