Active Vs Passive Investing

There is a very interesting discussion happening on Prem's blog. The moot point is that how much difference in returns one can make between passively investing (not your main livelihood) and actively investing. So if the difference is really huge, does it make sense to switch to active investment leaving your other income streams.

As per my thinking, all the number talk doesn't make sense unless you define "active investment". Do you consider job of a mutual fund manager an active investment? I would say no since he is getting a salary for making all the investment decisions and he is not directly affected by those decisions (of course his reputation will get a toss but he still will get the salary at the month end).

The moot question here is where it is good doing something as a part-time business or full-time business. A full-time business will require

a) Capital
b) Love for the business (termed as passion)
c) Risk-taking ability.

So the ups & downs of business will apply even to "active investing", and there will always be a learning curve. Nothing comes free (as in free beer).

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