Active vs. Passive Invest Management
by admin October 26, 2016
Active vs. Passive Management
Investors have 2 main investment strategies that can be used to generate a return on their investments account.
They are as follows:
1) Active Portfolio Management
- This strategy focuses on outperforming the market compared to a specific benchmark
- Here the role of fund managers is extensive who keep track of all your investments and they are responsible for generating returns for you.
- A high management fee is charged in this case since your money is being handled by professional persons who keep a check on factors such as market trends, shifts in the economy, and changes to the political landscape etc.
- The managers feel that with their extensive knowledge it is possible to outperform the market and generate superior returns for the investors.
2) Passive Portfolio Management
- It involves the creation of a portfolio allocation that is same as a specific index. It is basically called value buying and holding such as buying Nifty 50 index stocks and holding it.
- There is not much scope for a fund manager in this case.
- There is very less investment such as fees which needs to be paid to the role of a fund manager is very less.
- Thus, the return generated is based on the performance of the stocks in that particular index.
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