Fees are typically lower for passive investing compared to active investing.
Passive Investing:
- Lower Fees: Passive investment strategies, such as index funds and exchange-traded funds (ETFs), generally have lower management fees because they aim to replicate the performance of a specific index rather than actively picking stocks. This results in lower trading costs and less frequent adjustments to the portfolio.
Active Investing:
- Higher Fees: Active investment strategies involve fund managers making decisions about buying and selling securities in an attempt to outperform the market. This leads to higher management fees, as active funds usually require more extensive research, analysis, and frequent trading, which can also increase transaction costs.
In summary, passive investing tends to be more cost-effective due to its lower fees, while active investing usually incurs higher costs because of the management and trading involved.