The World Cup and investing: does the manager matter?
With the World Cup starting in Russia this Thursday, the beautiful game provides a useful analogy for the pros and cons of active and passive investing.
2 min read
Some people don’t see the point in paying an expert to actively manage their investments when cheaper products are available that simply mirror market movements. But there are benefits to each approach and the best strategy could be a mix of both.
Active investing is like the most hands-on football manager you can think of – someone who has a big say in picking the team and pays unwavering attention to every detail, from tactics to the players’ health, fitness and diet. A manager who is well-equipped to be flexible and react to what’s happening during a game based on lots of variables.
It’s all about poring over every detail, every day, to get the best performance. Germany’s national team is a good example of this – top-performing and able to adapt to almost anything the other side throws at it.
In investing, an active fund manager will:
- constantly review your investments
- make judgement calls based on their experience and expertise, backed by a wealth of analysis and research
- work to beat the market and mitigate against risk
In both investing and football though, even those at the top of their game can get it wrong, so there is greater risk as well as potentially greater reward. It is also important to remember that active investment managers can’t always outperform the competition, and occasional dips in performance are to be expected.
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