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By Jason Stipp and Christine Benz | 08-23-2012 01:59 PM

Active, Passive, or Both?

A successful portfolio might include components of both indexing and active fund management, says Morningstar's Christine Benz.

Jason Stipp: I'm Jason Stipp for Morningstar.

Active fund managers have had yet another rough year in beating their benchmarks. We've also seen a lot of investors moving into passive strategies.

So how should you think about implementing active or passive or both strategies in a portfolio? Here with me to offer some tips is Morningstar's Christine Benz, our director of personal finance.

Christine, thanks for joining me.

Christine Benz: Jason, great to be here.

Stipp: So this debate is very heated. We have partisans on both sides. There are some very clear lines in the strategies, but you say that, even though some people feel very strongly, you may or may not, and that's okay.

Benz: I think that's right. So, if people have firmly held views on this topic, if they are all index all the time or maybe they are comfortable holding actively managed funds or even picking their own stocks, that's fine. I'm not going to try to dissuade them from their viewpoints. In fact, I think one of the keys to being a successful investor is having a strategy that you believe in, and you're prepared to stick with it. But I do think that for a lot of investors, a successful portfolio might include components of both approaches. It may be anchored primarily in index products and use some active products or even individual stocks around the margins. I don't think that there is necessarily one single way to do it.

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