If you're serious about growing wealth, the strategy you choose matters. Passive investing—buying index funds, sitting back, and riding the market—has become popular for good reason. It’s cheap. It’s simple. It works… until it doesn’t.
But simplicity doesn’t equal superiority. Markets change. Conditions shift. Risk evolves. And passive portfolios? They don’t budge. They follow. They mimic. They assume the future looks like the past. That’s not how serious investors build real, durable value.
Active investment management, done right, is hard. It requires judgment, speed, and relentless analysis. But when the goal is to outperform—to win, not just to play—active management gives what investors lack with mediocre options created by Blackrock & the like.
What We're Really Talking About
Let’s get the definitions out of the way:
- Active management: You (or someone you trust) make decisions based on what’s actually happening. You shift. You adapt. You hunt for value. You play offense and defense.
- Passive management: You buy an index, sit tight, and accept whatever the market gives you. No steering wheel, no brakes. Upside is much less compared to proper active management.
Passive investing is fine—for people who are fine with settling for mediocrity.
Why Active Investment Management Matters
1. Outperformance Is Possible
Markets are inefficient—especially in the short term. Skilled active managers find mispriced assets, read signals, and exploit volatility. That’s called alpha. Passive strategies can’t do that because they don’t even attempt to. Overly diversified holdings can only, at best, produce average results.
2. Flexibility Is Power
The world doesn’t stand still. Neither should your investments. Geopolitics, tech disruption, regulation, everything moves fast. Active managers with the right datasets, analysis, and understanding move with it. Passive funds stay glued to yesterday’s structure, always operating steps behind. With depth of perception, understanding, and performance, mastering the art of excess return is challenging, but that is where platforms like Openvest come in.
3. Better Risk Control
Active portfolios aren’t chained to one shape. They can sidestep overvalued sectors, avoid bubbles, and go defensive when needed. In 2008, passive funds took the full punch. Many active managers didn't. Those able to profit from their short positions or realize specific strategies that came to fruition in 2008, were able to mitigate the crisis much better & able to manage risk better as a result.
By having a Long/Short structure, skilled active funds were able to weather the downturn, mitigate losses, and even position themselves to capture more upside post-crisis. This is not something that is commonly understood by most investors. To be quite frank, most investors are unaware of it. The overarching mission of Openvest is to open the door of excess returns to all investors, not just the top 1% of the world.
4. Custom Strategy, Much Improved Performance
No two investors have the same goals, however, that does not mean the passive is better for some. I cannot emphasize enough about active management.
Why use the same playbook? Active management allows for alignment with your personal timeline, risk tolerance, and ambitions. What is key about active management is that it can be customized to achieve your desired risk profile & dramatically improve returns. Let’s take one example:
Warren Buffett didn’t just beat the market—he crushed it. Even during down years for the broader market (like 1957, 1960, 1962, 1966), the partnership delivered positive returns. This early run cemented Buffett’s reputation and attracted serious capital.
Below is a side-by-side comparison using S&P 500 total return (with dividends) vs. Buffett Partnership Ltd. (BPL) for those 10 years:
| Year | Buffett Partnership (BPL) | S&P500 (Total Return) |
|---|---|---|
| 1957 | +10.4% | -10.8% |
| 1958 | +40.9% | +43.4% |
| 1959 | +25.9% | +11.9% |
| 1960 | +22.8% | +0.5% |
| 1961 | +45.9% | +26.9% |
| 1962 | +13.9% | -8.7% |
| 1963 | +38.7% | +22.8% |
| 1964 | +27.8% | +16.5% |
| 1965 | +47.2% | +12.4% |
| 1966 | +20.4% | -10.1% |
The 10-year CAGR (Compound Annual Growth Rate) of the Buffett Partnership was 29.5% & the 10 year CAGR of the S&P 500 at the time was ~9.2%. One more interesting point to note is that if the S&P 500 had been Buffett's benchmark from the beginning, the story would have been the same: he destroyed it. And not just by a little—it was a threefold difference in compound annual returns.
Bottom line, active managers are able to go deep and find value where indexes will not.
Explore More: Why Most Individuals Shouldn’t Manage Their Investments
The Pitfalls of Passive Investment Management
Let’s be clear—low cost doesn’t mean low risk. Passive funds do all of the following:
- Ride every downturn, with no way out.
- Stay stuck with exposure to underperforming sectors.
- Miss hidden, high-potential opportunities
- Give a false sense of security—"safe" because it’s diversified. But diversification doesn’t eliminate risk. It just spreads .
When the market drops, passive portfolios go down with it in a very correlated fashion.
No shield. No strategy. Just exposure.
Adapt
The pace of change is speeding up—AI, climate risk, shifting geopolitics, new regulation. Volatility is the norm. Passive strategies aren’t built for this kind of world.
They’re built for stability, not disruption. Passive strategies fail to capture shifts that lead to the greatest excess returns.
You want performance? You want protection? You want an edge?
You need active management.
Final Words
At Openvest we are not building by copying what worked yesterday. We stay close to the information sets, the customer, obsessed over detail, and make bold, high-conviction bets. That is active thinking. That is exactly how you lead.
In investing, it is no different. If you want to beat the market, not just track it—if you care about resilience, adaptability, and long-term returns—then active management isn’t just an option. It’s the only option.