Comparing strategic beta, active and passive

Introduction
Investors have long known about two distinct investment choices: active and passive strategies. With the advent of strategic beta indexes, passive strategies are no longer clearly defined. Understanding the differences between traditional index, strategic beta and active management can help you evaluate whether combining these strategies may provide an additional level of diversification for your portfolio.
Investment strategy comparison
The table below highlights many of the differences across the passive/active spectrum.
Traditional indexing | Strategic beta indexing | Active strategies | |
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Overview |
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Index construction |
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Investment discipline |
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Potential tax impact |
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Costs and performance |
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This is not an all-inclusive list of the differences between strategies.
This is a generalization of the strategies and is being presented for illustrative purposes only.
Summary
Schwab Asset Management has long been a proponent of considering traditional indexing, strategic beta and active management as complements rather than competing strategies. We believe that combining these three strategies can add additional diversification to portfolios. The most important consideration for investors is to understand their investment objectives and how these different strategies can help.
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