Are active strategies always more expensive than passive strategies to implement?

Not in fees alone, but active strategies typically involve higher turnover, generating both trading expenses and taxable gains. Market-cap weighted passive strategies naturally rebalance as stock prices move—no buying or selling required. This means lower transaction costs and fewer capital gains distributions. When you factor in the total cost of ownership, passive strategies often maintain a significant advantage beyond just the expense ratio.

Topic: Portfolio ConstructionLast updated: