Passive Funds are Not Risk Free

Critics of active management are quick to point out its failings - but investors should take as much care choosing passive funds as they are not risk free either

Emma Wall 31 October, 2014 | 9:46AM
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This article is part of the Morningstar's Guide to Active vs Passive Investing. Click here for our edit on how the experts use the tools at their fingertips, finding out whether you prefer one to the other and examining how to blend active and passive investing for profit.

Investors are being warned passive funds carry hidden risks, and should be treated with as much caution as active investing.

Choosing investments based solely on the annual fee means investors may end up with exposure to companies and assets they do not wish to have, and risk losing capital.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Wall  is former Senior International Editor for Morningstar