Popular passives

New research from Legal & General Investments has found that passive investments are becoming more popular in 2012.

Nearly two in five (38%) of IFAs said they would be recommending passive funds in 2012, an increase of 7% on 2011.

The number of IFAs recommending actively managed funds has remained steady at 80%.

Here at Informed Choice, we believe that both passive and active fund management should play a role in a well constructed investment portfolio.

Some asset classes and regions are better suited to active management, whilst others are better suited to the passive approach.

Whilst keeping down the cost of investing is important, investors often struggle to compare active and passive funds on a like for like basis.

This is because annual management charges on active funds typically include the cost of platform administration and ongoing advice. The ongoing charges for passive funds often only cover the cost of fund management.

Where investors do choose to include passive funds as part of their investment portfolio, it is important to understand how they are regulated, their replication strategy and the full nature of their costs.

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