As for people who want to make money with the help of passive income strategies, you should be worried. So say the key analysts at Morgan Stanley. Let’s figure out why.
This is not the first time that we have encountered the concept of “passive investment.” Passive investing implies minimal or no investor participation.
The reasons behind the decision to move from active to passive investment are many, but the most important of them are less commission, easier access, reduced risks. Did I mention less commission?!
The volume of funds that investors invest in passive funds amount to about 500 billion dollars in the first half of 2017, according to statistics from Bloomberg.
ETFs are the choice of the majority of investors who want to make money, not really joining the process themselves. In fact, as of August of this year, 391 billion dollars were invested in ETFs, exceeding the total amount of funds for the entire last year, which amounted to 390 billion dollars.
Analysts believe that this trend shows a number of problems that will arise in stock markets. Firstly, the huge inflow of capital complicates the review of the real picture and trends in the markets.
Secondly, people abandon an important management tool, placing money in passive funds. If passive investments decline, active trading tools will be able to adjust the market or at least support it. However, with the current scenario, the opinions of people do not ask.
Third, passively invested funds have several mechanisms to prevent large losses, which are automatically activated in case of a sharp decline, closing all positions. At the same time that it can save from losses, a cascade effect occurs when a bearish wave begins.
It may be your time to take matters into your own hands.