An investor is an individual or entity that seeks to achieve financial goals and objectives through investing, by placing funds into financial instruments or other vehicles in order to earn a rate of return. Investment securities include stocks, bonds, mutual funds, derivatives, commodities, and real estate.

Active investors have an oriented, strategic position in a company or project, seeking to profit by making bullish or bearish decisions that they believe will outperform the market benchmark. An active investor may take account of the prevailing market conditions, focusing on specific stocks, sectors or regions to earn returns. Active investors may also be oriented toward growth or value strategies and sometimes adopt complex strategies like short selling. Active strategies can offer the potential for higher returns but also come with the risk of higher losses.

On the other hand, passive investors look to replicate the performance of a specific index by investing in a representational portfolio of assets, mimicking the asset weights of the index. The focus is on efficient return with minimal effort, rather than outperforming the index. Common passive investment vehicles include index funds and exchange traded funds (ETFs). Passive strategies are typically implemented with the focus being on minimising fees and transaction costs.

Regardless of the chosen strategy, an investor’s portfolio should always be diversified and adapted to their individual goals and risk tolerances. The portfolio may need to be periodically reviewed and adjusted to reflect changing market conditions, tax laws, and other relevant factors. A diversified, well-managed portfolio will help protect investors from potential losses and simultaneously provide the potential for growth.

Investing comes with risks, and it is crucial for investors to remain educated and abreast of different laws, regulations, and potential pitfalls that can potentially have a disastrous effect on their financial situation. As a safeguard, investors should always verify the credentials of any broker or adviser they consider doing business with. Furthermore, investments should never be made with funds needed for essential expenses, like rent or food. Decisions related to investments should always be made with due diligence and with the guidance of a qualified financial professional.