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A primer on active versus passive investing

A primer on active versus passive investing

by Allan Gray, Portfolio Manager, CIBC Wood Gundy


As an investor, it’s important to think about how you’d like to invest your money. Depending on your needs and goals, you can consider a passive or active investment approach.

Passive Investing

Passive investing attempts to mimic the composition of a market and produce results that are similar to that market. For instance, you can purchase an index mutual fund or exchange-traded fund (ETF) that owns every stock in an index. These investments follow the market that they mimic through its ups and downs.

Active Investing

Active investing selects certain investments while rejecting others, producing returns that will almost certainly differ from the overall market. You can implement an active investing approach by investing in actively managed mutual funds or by selecting individual stocks. An actively managed investment fund is one in which a portfolio manager or a management team makes decisions about how to invest the fund’s money – usually by selecting individual stocks, bonds or both.

Whether you’re interested in an active or passive strategy, you can do it on your own or with the help of an investment advisor.

In a future edition, I will provide insight on management fees and the type of investor who may benefit from passive or active investing.

Allan Gray is an Investment Advisor and Portfolio Manager with CIBC Wood Gundy in Calgary, Alberta. The views of Allan Gray do not necessarily reflect those of CIBC World Markets Inc. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.

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