Passive or Blended: Which portfolio is right for me?

Choosing whether you want a Blended Portfolio or a Passive one depends very much on the value you put on a managers day-to-day tactical intervention on your investments and, as is so often the way, how much you want to pay. Let’s take a closer look at how this plays out.

Passive portfolios are highly diversified along both geographical and economic sectors and are made up exclusively of investments that track an index or range of indices. As a result, managers and research teams make no day-to-day tactical decisions on these portfolios. Their only involvement will be at the start when the weightings between the individual funds are agreed.

In practice, this means that no one can make quick changes in reaction to world events, which could result in excess gains or losses in one sector or another. It is down to the skill and judgement of the fund manager and their team to make the decisions at the outset to protect your investment from greater falls than the market experiences or give greater weighting to sectors of the economy which may outperform the market.

Seeing the value of a hands off, low cost approach

By removing the need for people to take the time to make those day-to-day decisions, you dramatically reduce the costs involved in running the portfolio and as such, our Passive Portfolios cost less than our SK Blended Portfolio.

The SK Passive Portfolio tends to suit those clients that believe the human involvement with regard to tactical or strategic decisions holds no extra value to the investment outcome. They would rather pay lower fees when compared with the blended portfolio.

Paying for expertise to boost performance

Blended portfolios contain a mixture of those index tracking funds you find in passive portfolios and actively managed funds, where the skill and judgement of fund managers can potentially lead to an outperformance over the SK Passive Portfolio. We cannot guarantee that outperformance will be achieved and past performance alone should not be used to express preference for one over the other. But that is what the overall aim of this approach is.

We recommend our blended portfolio to clients who see the value in the day-to-day tactical changes to the investments that a fund management team offers. And as a result of this more involved approach, blended portfolios carry a higher fee when compared to the passive portfolio.

Choosing the right approach for you is a very personal decision and from our perspective there is no right or wrong answer here. Please do get in touch if you would like more information on the different portfolios we offer here at SK.