FMP
Nov 12, 2023 11:18 AM - Parth Sanghvi
In the realm of investing, two primary approaches dominate the landscape: active investing and passive investing. While both aim to generate returns for investors, they differ significantly in their philosophies, strategies, and associated risks.
Active investing involves a hands-on approach, where professional fund managers or individual investors actively select and manage a portfolio of securities, aiming to outperform the broader market. Active investors employ various research methods and analytical techniques to identify undervalued stocks or anticipate market trends.
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Market Timing: Active investors believe they can outperform the market by identifying undervalued stocks or anticipating market movements.
Stock Picking: Active investors actively select individual stocks based on their research and analysis.
High Fees: Actively managed funds typically carry higher management fees compared to passive index funds or ETFs.
Passive investing, also known as index investing, advocates for a buy-and-hold strategy, focusing on long-term growth rather than short-term market timing. Passive investors typically invest in index funds or ETFs that track broad market indexes, such as the S&P 500 or the Dow Jones Industrial Average.
Market Efficiency: Passive investors believe in the efficient market hypothesis, assuming that stock prices already reflect all available information.
Index Tracking: Passive investors seek to replicate the performance of a broad market index, diversifying across a wide range of securities.
Low Costs: Passive index funds and ETFs typically carry significantly lower fees compared to actively managed funds.
Numerous studies have examined the long-term performance of active vs passive investing strategies. The general consensus suggests that passive investing has historically outperformed active investing over extended periods.
S&P 500 Index Performance: Over the past 90 years, the S&P 500 index has yielded an average annual return of around 10%.
Active Fund Performance: Studies indicate that only a small percentage of actively managed funds consistently outperform the market over the long term.
Cost Impact: The high fees associated with actively managed funds can significantly erode their potential returns compared to low-cost passive index funds or ETFs.
Sep 11, 2023 1:38 PM - Rajnish Katharotiya
Price to Earnings is one of the key metrics use to value companies using multiples. The P/E ratio and other multiples are relative valuation metrics and they cannot be looked at in isolation. One of the problems with the P/E metric is the fact that if we are in the peak of a business cycle, earni...
Sep 11, 2023 1:49 PM - Rajnish Katharotiya
Price-to-Earnings ratio is a relative valuation tool. It is used by investors to find great companies at low prices. In this post, we will build a Python script to calculate Price Earnings Ratio for comparable companies. Photo by Skitterphoto on Pexels Price Earnings Ratio and Comparable Compa...
Oct 17, 2023 3:09 PM - Davit Kirakosyan
Shares of VMware (NYSE:VMW) witnessed a sharp drop of 12% intra-day today due to rising concerns about China's review of the company's significant sale deal to Broadcom. Consequently, Broadcom's shares also saw a dip of around 4%. Even though there aren’t any apparent problems with the proposed solu...