Active management is an investment strategy in which an investment manager or a team of managers actively manage a portfolio of assets intending to outperform a benchmark index or a specific market segment. Active management requires more research, analysis, and decision-making and can be more expensive than passive management.
Why Active Management?
Investors believe that skilled fund managers can use their expertise to identify and take advantage of these opportunities, resulting in higher returns. Active management can benefit markets with a lot of volatility or uncertainty, as fund managers can adjust their holdings accordingly to mitigate risk and capitalize on opportunities.
Active vs. Passive Management
Passive management is often viewed as a more cost-effective and low-risk approach to investing. By investing in index funds, investors can gain exposure to a broad range of assets without incurring the fees associated with active management. In addition, passive management can offer consistent returns, as index funds typically track the performance of well-established benchmark indices. However, passive management may not offer the same potential for outperformance as active management, and investors may miss opportunities to capitalize on market inefficiencies.
Benefits of Active Management
Active management offers several potential benefits for investors. One significant benefit is higher returns. Skilled fund managers who identify undervalued assets or capitalize on market inefficiencies can generate higher returns than passive investors who track a benchmark index. In addition, active management can offer more flexibility and customization, as fund managers can adjust their holdings to reflect changing market conditions and investor preferences.
Active Management Dallas
While it can be more expensive and risky than passive management, active management can offer the potential for higher returns and more flexibility. For investors looking for an active management, Westwood Wealth Management is a great option.
