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Active Management

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Active Management
The use of a human element, such as a single manager, co-managers or a team of managers, to actively manage a fund's Portfolio.
    
Active managers rely on analytical research, forecasts, and their own judgment and experience in making investment decisions on what securities to buy, hold and sell. The opposite of active management is called Passive Management, better known as "indexing".
    
Active management is the opposite of Passive Management, in which the manager does not seek to outperform the Benchmark index.
    
Active Portfolio managers may use a variety of factors and strategies to construct their Portfolio. These include quantitative measures such as P/E ratios and PEG ratios, sector bets that attempt to anticipate Long-term macroeconomic trends (such as a focus on energy or housing stocks), and purchasing stocks of companies that are temporarily out-of-favor or selling at a Discount to their Intrinsic value. Some actively managed funds also pursue strategies such as merger Arbitrage, Short positions, Option writing, and Asset allocation.
    
Investors who believe in active management do not follow the efficient market hypothesis. They believe it is possible to profit from the stock market through any number of strategies that aim to identify mispriced securities.
    
Investment companies and fund sponsors believe it's possible to outperform the market, and employ professional investment managers to manage one or more of the company's mutual funds. The objective with active management is to produce better returns than those of passively managed index funds. For example, a large Cap stock fund manager would look to beat the performance of the Standard & Poor's 500 Index. Unfortunately, for a large majority of active managers, this has been difficult. This phenomenon is simply a reflection of how hard it is, no matter how smart the manager, to beat the market.
Posted by  HighQuest Group
 
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