Tag: active management

What is active management?

Active management is when a fund manager picks stocks, rather than aiming to match benchmark indexes. To do this, they use research, forecasts, experience and critical judgement to make investing decisions aimed at outperforming the investment benchmarks.

In contrast, there is passive management. Passive management is also known as indexing. There is more work associated with active management than there is with passive management.

ETFs are highly efficient mutual funds with low fees because investors don’t pay for active management. Instead, ETFs aim to mimic the performance of a market index, by holding the same securities in the same proportions used to calculate the market index.

ETFs practice passive fund management, instead of actively managing clients’ investments like  conventional mutual funds provide (but with much higher fees). Traditional ETFs stick with this passive management—they follow the lead of the sponsor of the index. Sponsors of stock indexes do from time to time change the stocks that make up the index, but generally only when the market weighting of stocks change. They don’t attempt to pick and choose which stocks they think have the best prospects.

ETFs are like highly efficient mutual funds. Fees are low because investors don’t pay for active management.

Having a fund manager actively manage investments will always be more expensive than investing in passively managed investments.

At TSI Network, we recommend using our three-part Successful Investor philosophy:

  1. Invest mainly in well-established companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
  3. Downplay or avoid stocks in the broker/media limelight.

Discover the risks and rewards of investing in Canadian ETFs, claim your FREE digital copy of Best Canadian ETFs, Canadian ETFs vs Mutual Funds, Canadian Index Funds and More now.

Read More

Keep it simple when investing in ETFs

March 15, 2018||ETFs

These two ETFs scored well at the annual Thomson Reuters Lipper Fund Awards. That reflects their performance over the last three years, along with their scores in other key areas.

However, we continue to recommend investors limit their ETF selection to funds that track established… Read More

Preferred shares come with price volatility

March 15, 2018||ETFs

Preferred shares are equities that pay fixed dividends without offering investors voting rights. Still, those payments are made before dividends to common shareholders.

While investors are attracted to “preferreds” for income, those shares are sensitive to the movement of interest rates and their prices can… Read More

These ETFs aim to rise with world markets

March 15, 2018||ETFs

Almost half of the world’s stocks trade on exchanges outside of North America, where the economic and political climate can increase risk. However, even in developed countries with stable markets, price-to-earnings ratios are generally more attractive than they are in the U.S. (See supplement on… Read More

Pass on this ETF

March 15, 2018||ETFs

FIRST ASSET ACTIVE CANADIAN DIVIDEND ETF $9.40 (Toronto symbol FDV; TSINetwork ETF Rating: Aggressive; Market cap: $32.1 million) aims to invest in Canadian dividend payers with the potential for capital gains. Its own dividend yield is a high 4.0%.

The ETF takes an active management approach:… Read More

These four ETFs offer exposure to ‘sin’

February 8, 2018||ETFs

Traditional “sin stocks” include gambling, tobacco and alcohol. Many of the major companies focused on these areas continue to deliver expanding sales and profits. Still, investors need to factor in the risks of everchanging government laws and regulations, taxes and fickle consumers. (See the supplement… Read More