Active Investing
This is like being hands-on with your money. You (or a fund manager) try to beat the market by picking specific stocks, timing buys and sells, and shifting strategies based on research or market trends.
Pros:

• Potential for higher returns if done well
• Can react to market changes or news quickly
• Opportunity to outperform during market volatility

Cons:

• Usually has higher fees (management + performance fees)
• More risk if picks or timing are wrong
• Requires research, time, or trusting a fund manager

🔍 Example:
An actively managed Australian equity fund where fund managers research and choose which ASX-listed companies to invest in, aiming to beat the S&P/ASX 200 index.

Passive Investing

This is a set-and-forget strategy. You invest in a broad market index (like the ASX 200 or S&P 500) and aim to match the market, not beat it.
Pros:

• Lower fees (less buying/selling = fewer costs)
• Diversified across many companies
• Good for long-term growth and compounding returns
• Less stress—no need to pick winners

Cons:

• No chance to outperform the market
• You’re exposed to all market downturns (no defensive moves)
• Some investors find it “boring”

Example:

Investing in an ETF (Exchange-Traded Fund) like VAS (Vanguard Australian Shares Index), which tracks the top 300 companies on the ASX.

Which One’s Better?

It really depends on your goals, time, and risk tolerance.

In Australia, passive investing through ETFs and index funds has become super popular thanks to providers like Vanguard, BetaShares, and iShares—especially for younger investors building long-term portfolios.

In the past few months we have experienced growing volatility in Share Markets. In the past few weeks this volatility has risen to extreme levels, with Share Markets seesawing up and down reacting to the inconsistent messaging coming from the White House.

Active investing has outperformed passive investing in recent months due to several factors:

1. Market Volatility and Active Management: During periods of market turbulence, such as the recent selloff triggered by tariff initiatives, active managers have the flexibility to employ risk management techniques to protect portfolios.
2. Concentration in Passive Indices: Passive funds often track broad market indices, which can become increasingly concentrated in a few large-cap stocks. This concentration can lead to overvaluation of these stocks, making passive strategies more vulnerable during market corrections. Active managers, on the other hand, can adjust their portfolios to avoid overvalued sectors .
3. Bond Market Inefficiencies: In the bond market, active managers have capitalized on inefficiencies by taking on more credit risk, leading to outperformance compared to passive bond funds. This trend was particularly evident in 2024, where active fixed-income managers outperformed their passive peers in various categories.

While active investing has shown strength in certain areas recently, it’s important to note that over the long term, passive investing has historically outperformed active strategies due to lower fees and consistent market exposure.

At Curve Wealth we have long been supporters of a passive investment approach based on comparative returns and the lower fees associated with it. We do however think there is merit in both strategies depending on the outlook for Share Markets, and a client’s tolerance for volatility or risk appetite. There is also growing evidence that the current disruption to what was the post WW2 World Trade regime may last longer than expected and in fact it may not ever quite return to what it was before President Trump dismantled it.

If that is the case, then the argument for an active investment approach just got stronger.

If you’re interested in exploring how these trends might affect your investment strategy or need assistance in comparing specific funds, feel free to ask!

The first step is to have a chat with us over the phone. This gives you a chance to find out how we work with our clients and our approach to the Advice Process. If we sound like we might be a good fit for you then the next step is to book in for a Financial Roadmap Meeting with us. Give Andrew a call on 03 9588 9000 to discuss the next steps.