When choosing which types of investments to use, you’ll almost certainly be faced with the question of choosing between active and passive management. Active management seeks to outperform the market by finding inefficiencies in the market. Passive management strives to replicate a certain relevant benchmark. Instead of looking to beat the market, passive management looks to replicate the market while keeping costs down.

When evaluating active and passive management, it’s a good idea to not view it as an either-or question—both philosophies have the potential to add value net of fees. In order to know which style to choose, you must take into account the benefits each may provide in order to decide whether the value provided can justify the possible costs.

Active Management

Active managers perform thorough analysis in order to try to add alpha—the added returns from a skilled manager—to investors’ bottom lines. There are instances where active management may provide added value. Active management can seek to avoid segments of the economy that are perceived to be weaker and shift assets to stronger areas. This can provide active managers the opportunity to beat the market in certain conditions, such as during the downturns of 2001-02 and 2008-09.

Additionally, active management tends to be more risk-averse, meaning that the investments you hold that are actively managed should have more downside protection. This could help limit your losses during the next bear market than if you only use passively managed investments.

This quest for alpha doesn’t come without costs. Not only do active managers tend to charge higher fees than their passive counterparts, but they are also less tax-efficient as you will incur capital gains taxes more often due to the higher frequency of trades. This means you’ll likely be paying more in taxes than had you invested passively in comparable assets.

Passive Management

There are many appeals to a passive management style. Perhaps most notable is the fact the fees are often quite low. Passive investments have comparatively lower fees since they simply track an index and have lower internal transaction costs. And, since passive managers tend to have lower turnover ratios (the percentage of holdings that are replaced during the previous year) than their active peers, you’ll have fewer taxable gains to pay for during a given year, which can lead to big savings over a long period of time.

One primary theory in support of passive management is that markets are efficient, meaning that market prices have incorporated all available information. Even though markets are largely efficient, inefficiencies still exist. These inefficiencies are illustrated by the performance of momentum investments. Momentum refers to the theory that investments that went up one year have a high likelihood of going up the next year. In a truly efficient market, the information about past performance should be priced into the market. In reality, momentum stocks have outperformed the S&P 500 by about 5% annually over the past 40 years.

And, depending on how diversified you want your portfolio to be, passive management may not even be a realistic option when investing in certain securities. If you want to invest in emerging market debt, for example, there may not be an available index that fully captures the market that is easily replicated, thereby requiring you to utilize a more active management style if you want to follow through with certain investments.

The next time you’re deciding between an active and a passive investment, remember your values and what your goals are for your portfolio. This will help you decide whether active, passive or a mix of the two is best for you.

This article originally appeared on August 2, 2015 in the Brainerd Dispatch. You may view the article here.