Active vs. Passive Management

by susma November 09, 2017
Active Vs Passive Management, WealthhunterIndia

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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