What is the difference between Active balance and passive balance?

2023-12-08

Active Balance:

Definition: Active balance involves proactive and intentional efforts to maintain equilibrium or stability.

Example: In investment, actively managing a portfolio by regularly buying and selling assets to capitalize on market trends or economic conditions is considered an active balance strategy.

Characteristics: Requires continuous monitoring, decision-making, and adjustments to respond to changing circumstances.

Passive Balance:

Definition: Passive balance involves a more hands-off or automatic approach to maintaining equilibrium without frequent interventions.

Example: A passive investment strategy, such as investing in a market index fund and holding onto it for the long term, reflects a passive balance approach in financial management.

Characteristics: Involves less frequent adjustments, relying on the stability of underlying systems or strategies without frequent human intervention.