Investors divide into two categories – a passive investor and an active investor. What is the principle of this separation? What are the pros and cons of active and passive investing? And most importantly, who has higher income and why?
An Active Investor
An active investor is constantly searching for new investment opportunities.
Active investors will define an investment strategy and target investment returns.
An active investor will search for a deal, assess risks, carry out deal due diligence, study local market data and trends. After all, the more deals he seals, the more profit he receives.
A Passive investor
The goal is to obtain assets with potential future growth in value. Usually, they will invest in a property asset that generate steady rental income and require minimum of their time and attention.
Another critical criterion for passive investors is risk mitigation and diversification. To do this, they usually build their property portfolio using various strategies. This measure allows to protect their assets from various force majeure financial situations in the market or change in legislation.
How do I choose what’s best for me?
As an investor, you should look at your individual time commitment, investment knowledge, risk tolerance and income goals in determining whether you are a passive or active investor.
For investors who wish to have a more hands-off approach, whether due to time commitments or lack of knowledge, passive investing is a simple yet effective way to start investing.
Active investing is an option for those who have sufficient knowledge, as well as have the time and energy search for property deals.