Active Management: What Does it Mean?

Active management, also known as active investing, is a strategy used by fund managers or brokers to trade financial assets with the goal of making profits regardless of market conditions. This approach involves frequent buying and selling of assets based on perceived market opportunities.

Get to Know with Active Management

On an individual level, active management involves individuals making trading decisions based on market movements. However, it can also refer to a collective effort by managers or brokers to profit from trading a specific set of assets.

What Active Management is?

Active management relies heavily on analytical research and investment decisions. It operates on the belief that it is possible to outperform the market, contrary to the efficient-market hypothesis (EMH), which suggests that asset prices already reflect all available information.

Success in active investing depends on the ability of managers to accurately predict market trends. They must closely monitor market movements to increase the likelihood of making profitable trades.

What Passive Investing is?

In contrast, passive investing, or indexing, involves building a long-term investment portfolio that is not actively traded. Instead, it is based on the performance of an index. Passive management is associated with lower trading costs and risks compared to active management.

Growing Interest in Passive Investing

Due to its higher costs and historically lower performance compared to indexing, there has been a growing interest in passive management strategies than active management. One of the leading causes is Active management has higher trading activities, thus higher risk.

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DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.