Active investment managers “actively” research and analyze various things that could have a material impact on the value of your investments. This might include securities markets, economic trends, political changes, global trends, and deep-dive investment strategy research to determine how best to manage your portfolio in various types of economic scenarios. They do this work because they believe that you can outperform passive investors by applying skill and research, and they generally charge higher fees to cover the additional costs of all this work to deliver an actively managed strategy.

This compares to passive managers, who don’t actively monitor these categories that could have a material impact on the value of your investment. They believe that a buy-and-hold investment strategy is the best long-term strategy. Historical data suggests that while this may be the case for certain investment strategies, it is not the case for all investment strategies. Also, passively managed portfolios often can incur a higher level of risk than more actively managed strategies that can protect portfolios from large market selloffs.