Active investing vs Passive investing - which one is for you?

Mintd Team
March 17, 2022

I’ve made my views on passive vs active investing clear many times, but I’ll repeat my favorite stat for emphasis: In the US, more than 80% of active fund managers have underperformed the broader market over the last decade. Meanwhile in India, a similar percentage have underperformed the local market over the past five years.

Passive investing = investing in a fund that the tracks the market 1:1. If the NIFTY 50 goes up 1%, you make 1%.

Active investing = trying to beat the market (or picking mutual funds that you think will beat the market). If the NIFTY 50 goes up 1%, you hope you make 1.25%.

Not only is the latter hard, as illustrated by the 4 out of 5 well-paid professionals who fail at it, but it is also:

1. Time consuming: You have to pay attention to all the stocks or managers in your portfolio, every day, to make sure things are going according to plan.
2. Emotionally draining: Ever wake up one morning and find out there’s bad news in your favorite stock? Try getting any other work done on that day.

In addition to better returns more often that not, passive investing also gives you the freedom that comes with not having to decide, and not having to pay attention.

Everyone’s favorite stock is down 30% because the whole executive team just quit? Doesn’t matter to you, you’re invested in the market. The star active manager that all your friends picked has underperformed over the past year? Who cares, you can’t underperform the market when you are the market.

I’ve spent a long time doing both - active and passive - and can’t emphasize the peace that comes with putting things on autopilot.

At Mintd, we want to give you back your time and mental bandwidth to spend on the things that matter. We don’t try and pick stocks or managers. We focus on what has worked over decades instead - picking the right markets, keeping costs low, diversification, and staying invested over long periods of time.

Sign up for our waitlist here so you can also put your wealth creation on autopilot:

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