Active Management

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Definition of 'Active Management'

Active management is a type of investment management in which the fund manager actively trades the fund's holdings in an attempt to outperform a benchmark index. This is in contrast to passive management, in which the fund manager simply tracks the performance of the index.

Active managers use a variety of strategies to try to outperform the market, such as fundamental analysis, technical analysis, and market timing. Fundamental analysis involves evaluating a company's financial statements and other information to determine its intrinsic value. Technical analysis involves studying historical price charts and other market data to identify trends and patterns. Market timing involves trying to buy and sell stocks at the right times to take advantage of market movements.

Active management can be a more expensive way to invest than passive management, because of the fees charged by the fund manager. However, active managers may be able to generate higher returns than passive managers over time.

There are a number of factors to consider when choosing between active and passive management. These include your investment goals, time horizon, risk tolerance, and investment budget. If you are looking for a relatively low-cost way to invest for the long term, passive management may be a good option. However, if you are willing to pay higher fees in exchange for the potential for higher returns, active management may be a better choice.

Here are some of the pros and cons of active management:


* Active managers can potentially outperform the market over time.
* Active managers can use a variety of strategies to try to achieve their investment goals.
* Active managers can provide you with more personalized service than passive managers.


* Active management can be more expensive than passive management.
* Active managers may not be able to consistently outperform the market.
* Active managers may make investment mistakes that can lead to losses.

Ultimately, the decision of whether to use active or passive management is a personal one. You should carefully consider your investment goals, time horizon, risk tolerance, and investment budget before making a decision.

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