There's a lot of talk amongst investors these days about active investing versus passive investing, with strong arguments in both camps.
The basic idea of active investing is being a hands-on manager, (hopefully) picking the winners and increasing your returns, compared to passive investing, where you invest in an exchange-traded fund (ETF) to own a highly-diversified imitation of a broad market index.
I've outlined below a few key points that could mean 2020 is the year that active management can deliver strong returns for your ASX share portfolio.
1. Global politics has created an opportunity
With equity markets heating up amid the backdrop of the US–China trade war, tensions with Iran and the uncertainty of Brexit, it's hard to know what's the best strategy for your portfolio.
While the Vanguard Australian Shares Index ETF (ASX: VAS) fund is up 19.3% so far this year, we've seen several ASX gold mining share prices significantly outperform the ASX 200 index.
The Fortescue Metals Group Limited (ASX: FMG) and Newcrest Mining Limited (ASX: NCM) share prices are up 88.9% and 70.6%, respectively, so far this year while many other ASX 200 gold miners have also outperformed, albeit to a lesser extent.
With the uncertainty in global political conditions set to drag on into late 2019 and early 2020, including the US–China trade war and Brexit outcomes, there could be great buying opportunities in the ASX 200 for Fools with the right strategy.
2. You can invest in active managers yourself
Even if you don't subscribe to the above, or feel like you can't pick the right stocks yourself, the likes of Magellan Financial Group Ltd (ASX: MFG) has shown us that it is possible to consistently outperform.
The Magellan share price is up 116.4% so far this year on the back of strong fund performance over a number of years, which has boosted net inflows for the group.
Led by CIO Hamish Douglass, Magellan has proven that its possible for active managers to outperform and provides an easy way to gain active management exposure without doing the heavy lifting yourself.
3. Aussie equities remain on edge
After a mixed bag of August earnings results and the potential for further Reserve Bank of Australia interest rate cuts, the ASX 200 has been fairly volatile after delivering its best 6-month start to the year since 1991.
It's in environments like these that active management strategies can thrive, compared to a bullish market where indexes deliver strong returns across the board.
By picking a hot ASX growth stock such as Nearmap Ltd (ASX: NEA) or more value stocks such as BHP Group Ltd (ASX: BHP) and its peers, 2020 could be the year that your portfolio beats the market and delivers those juicy returns.
With the yield curve further inverting, investors are fearing a recession that could wipe out gains, but I have a different view and one that is shared by the legendary Warren Buffett.
As the Oracle from Omaha said himself, "Be fearful when others are greedy and greedy when others are fearful."
Based on what I'm seeing in the markets, 2020 could be the year to get greedy and try to outperform the ASX benchmark funds.
