Choosing the right investment strategy is key to stable and continuous growth in the value of your money. One of the first steps for any investor should be deciding whether to actively trade on the capital markets or invest in and hold a stable portfolio for the long term. Both strategies have their advantages and pitfalls – while passive investing appeals through its simplicity and stable returns, an active strategy promises higher profits in exchange for more time and greater investment product risk.
The difference between active and passive investing is apparent from the names themselves. The key lies in how investors approach the market and which investment products they use.
Active investors trade frequently – buying and selling securities with the aim of taking advantage of short-term market movements. They select specific shares that they try to buy at the right time – when they are at their cheapest and have the greatest potential for appreciation. They then try to sell the particular share at the highest possible price. The success of this strategy depends on careful market monitoring, correct timing and quick decision-making.
Advantages and disadvantages of active investing
➕ Higher potential profit – Active investors have the opportunity to achieve above-average returns. However, this only applies if they manage to time their purchases and sales correctly. This usually requires years of experience and a good understanding of the market, together with a dose of luck.
➕ Flexibility – Because they make their own decisions, active investors have a free hand in selecting shares or other investment opportunities. They arrange everything directly themselves, and therefore within moments.
➖ Increased risk (volatility) – One poor choice of share can significantly affect the entire portfolio. Results are also influenced by factors beyond the investor’s control – economic events, news, market panic, etc.
➖Higher fees and initial capital – Detailed analyses, tools and frequent transactions require time, knowledge and, above all, money. This strategy is therefore associated with high fees, which means that initial capital is necessary.
➖Blindly following trends – Active investors may get swept up in certain trends and follow them. However, this strategy is ineffective and insufficient, which is why strategies that rely solely on trends often do not pay off.
Among the general population, passive investing is the more common approach and is based on the simple idea of ‘buy and hold’. Investors using this investment strategy can make use of market indices that track market movements, or other investment instruments that do not fluctuate significantly over time or are even associated with fixed rates of return. This is a long-term strategy that does not pay off over a shorter investment horizon. The strategy relies on the long-term growth of the market as a whole.
Advantages and disadvantages of passive investing
➕ Lower costs – Because passive investors avoid frequent market trading, they do not incur additional transaction fees, so their investment costs are logically lower than those of active investors.
➕ Stable, long-term returns – Over the long term, passive investors’ returns can be higher. Historically, most equity indices have risen. If an investor holds their position for long enough, they can withstand even significant downturns.
➕Lower risk of loss – As with the previous point, the long-term approach is an advantage. Thanks to this, investors need not be unsettled even by current market downturns.
➕Simplicity and time efficiency – Investors do not have to spend hours on analysis – they simply need to choose a suitable investment product (a property fund, equity index or participation in loans secured by property), invest and hold. This strategy is therefore ideal for those who want to invest without major worries or demands on their time
➖ Lower flexibility and limited results – If an attractive investment opportunity arises, passive investing generally leaves no room for an immediate response. Passive investors do not react to current market opportunities, which means they may miss out on quick profits over a short time horizon.
➖ Investing without the adrenaline – An advantage for some, a deterrent for others. Passive investing does not involve quick decisions or dynamism, which some investors may find too calm. In this respect, it is important to act in accordance with your investment goals.
The comparison of advantages and disadvantages alone shows that passive investing currently has the upper hand. Many investors prefer convenience, lower costs and stable long-term returns. A passive strategy does not require as much time or in-depth market knowledge, making it an attractive choice for the general public. The growing number of financial advisers is also contributing to the popularity of passive investing, making the investment market accessible even to those who would otherwise never take the plunge.
Active investing takes a lot of time and study and is also very risky. To a large extent, it needs to be your hobby if you are to have a prospect of achieving the desired profit. However, active trading is growing in popularity with the rise of cryptocurrencies in the investment world, and for many people it is a passion and a stimulating topic to discuss with friends. According to some media outlets, 2024 saw another influx of active investors.
The active approach therefore remains relevant – particularly for more experienced investors or those who want to devote more time to investing and are kept on their toes by the risk they take.
The right choice depends primarily on your investment style, risk tolerance, available time and financial goals. Every investor should carefully consider the advantages and disadvantages of both approaches and assess which strategy will suit them better and fit their plans – or whether combining the two might make sense.
It is often said that the ‘middle way’ is the most sensible choice – and this applies all the more to investing. If you are unsure about a purely active or passive approach, you can divide your portfolio. For example, you can invest a larger proportion of your funds passively (perhaps in index funds), thereby securing stability, and allocate a smaller proportion to active investing, where you can test your ability to read the market and manage risk.
Whichever strategy you choose, realistic expectations and discipline are the main keys to success. Remember that investing is not a sprint, but rather a marathon.
If, like most investors, you lean more towards a passive strategy and prefer a conservative approach, consider looking beyond traditional equity markets as well.
One option is investing in loans secured by property – an ideal choice if you are looking for stable returns, low risk and do not want to pay entry or management fees. The current highest annual return on the RONDA INVEST platform is just under 7.5% p.a., which competes with long-term returns from equity indices.
Another advantage is the shorter investment horizon – most projects last 1 to 3 years. After this period, you can once again use the funds freely or reinvest them according to your current strategy and needs. Such flexibility is often key for conservative investors.
Whichever strategy you choose, the most important thing is to get started and remain consistent. Everyone can chart their own path to financial independence – according to their goals, means and pace.
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RONDA INVEST IN NUMBERS
Premium
Yield
The return represents the amount of money you get for the capital invested. It indicates the difference between the final value of the investment and the capital employed.
p.a. means per annum, i.e. yield calculated on an annual basis.
Example:
You invest CZK 10,000 with a return of 10% p.a. We will pay you the income in a proportional amount every month, you will get a total of CZK 1,000 in income per year.
Maturity
The maturity date indicates the binding date by which the loan will be repaid and when your investment ends.
After this date, we will send the original invested amount to your account along with the last return.
Min. investment
The minimum investment indicates the lowest possible amount that can be invested in the project.
LTV
LTV = Loan to Value
(translated as “loan to value”)
LTV indicates the ratio of the property’s value to the loan’s value. The lower the LTV, the higher the collateral.
LTV calculation = loan amount / estimated market price × 100
Svitávka (Blansko District)
Yield
The return represents the amount of money you get for the capital invested. It indicates the difference between the final value of the investment and the capital employed.
p.a. means per annum, i.e. yield calculated on an annual basis.
Example:
You invest CZK 10,000 with a return of 10% p.a. We will pay you the income in a proportional amount every month, you will get a total of CZK 1,000 in income per year.
Maturity
The maturity date indicates the binding date by which the loan will be repaid and when your investment ends.
After this date, we will send the original invested amount to your account along with the last return.
Min. investment
The minimum investment indicates the lowest possible amount that can be invested in the project.
LTV
LTV = Loan to Value
(translated as “loan to value”)
LTV indicates the ratio of the property’s value to the loan’s value. The lower the LTV, the higher the collateral.
LTV calculation = loan amount / estimated market price × 100
Štěnovice (south of Plzeň)
Special Offer
Yield
The return represents the amount of money you get for the capital invested. It indicates the difference between the final value of the investment and the capital employed.
p.a. means per annum, i.e. yield calculated on an annual basis.
Example:
You invest CZK 10,000 with a return of 10% p.a. We will pay you the income in a proportional amount every month, you will get a total of CZK 1,000 in income per year.
Maturity
The maturity date indicates the binding date by which the loan will be repaid and when your investment ends.
After this date, we will send the original invested amount to your account along with the last return.
Min. investment
The minimum investment indicates the lowest possible amount that can be invested in the project.
LTV
LTV = Loan to Value
(translated as “loan to value”)
LTV indicates the ratio of the property’s value to the loan’s value. The lower the LTV, the higher the collateral.
LTV calculation = loan amount / estimated market price × 100
Steti near Litomerice
CALCULATOR
The calculator calculation is based on a model example of a one-time repayment loan investment (full principal repayment at the end of the loan term). Returns are paid to investors monthly, and the calculator does not consider reinvestment. The actual performance of the investment may differ from the model example. It represents gross yield, subject to taxation. At RONDA INVEST, there are no entry fees or regular fees.
