Much has been said about the pros and cons of active vs passive stock investing. For those of us who are not clear still active investing refers to picking specific stocks to invest in. This stock picking can be done by yourself or by a fund manager when you buy a specific unit trust or mutual fund. Passive investing on the other hand, refers to buying the entire index without trying to decide if a specific stock is better than another.

Needless to say, passive investing costs much less since there are little transactional fees and fund management fees. The most common instruments for passive investing is via ETFs. ETFs also help to achieve diversification of the portfolio at minimal costs. It also requires less oversight and analysis on the investors part. Frequently the only knowhow required is to have discipline to dollar cost average and to rebalance your portfolio …