In a Bloomberg article from earlier this month, columnist Barry Ritholtz outlines some of the benefits and challenges inherent in active investing.

He cites the following “desirable goals” and some corresponding impediments to those goals:

• Alpha: outperformance versus a benchmark. “Of all the reasons to be an active investor,” writes Ritholtz, “alpha may be the most difficult to achieve.” He underscores the significant hurdle that both fund managers and individual investors face when attempting to choose benchmark-beating stocks.
• Expressive: investing toward a specific goal. An “unstated” desire of many investors is to “use their capital as an expression of their values and belief systems.”
• Risk management: controlling results by managing around a market or sector. The idea of being fully invested through a market pullback “is an anathema to some”, but argues that “most track records in market timing are pretty awful.”
• Behavioral: “affecting decision-making by investors.” The purpose of this, writes Ritholtz, “isn’t to beat the market, but rather to allow you to tolerate the more severe downturns in your core buy-and-hold portfolio when it’s being buffeted by a hurricane.”

Ritholtz emphasizes that he is not a “total curmudgeon advocating the death of active management,” but that these advantages are “more difficult to achieve than most people believe.”