The debate between active and passive investing may be missing the bigger picture, according to Anand Vardarajan, CEO & MD, Tata Asset Management. As markets contend with higher interest rates, persistent inflation pressures and changing valuation dynamics, Vardarajan believes investors should not view active and passive strategies as competing choices. Instead, both can serve distinct roles within a well-constructed portfolio.
Speaking at the ET Alpha Wealth Summit 2.0, Vardarajan argued that portfolio construction should be built around the problem each investment strategy solves. Passive investments can provide a low-cost, index-linked foundation, while active strategies can be used to seek alpha. Multi-asset strategies can add diversification, while higher-risk strategies can provide an opportunity for additional returns, albeit with greater downside risk.
