Are you an active investor or do you prefer to let the index do all the hard work? There are pros and cons for both options, and tax comes into it too. The question of whether passive or active investing is the best route to success is one that is constantly debated. "Indexing is the only way to reduce risk," the pacifiers say. "Active investing is the only way to add alpha," say the activists. What's a poor investor to do? Well, when faced with such a schism, the best response may be to take something from each side. Indexing became extremely popular after the global financial crisis as investors believed that by tying their risk to the market, they could reduce it. But while that may be correct, the active managers are also right in saying that when you do that, you give away any chance of outperforming the index.
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