Investment Management

Active Investment Management

1

Active investment management involves an individual using their discretion as to the timing of investment decisions and may change the composition of a portfolio on a regular basis.

2

Active investment management is utilized under the belief that the expertise of the individual will help to improve returns. Therefore, it is thought that there is an advantage to regularly changing the portfolio.

3

It assumes that assets can be mispriced in the market and that the manager can spot and take advantage of those mispricings. However, a less skilled manager may suffer from poor timing that hurts returns.

4

Active investment management is difficult to get right, with numerous research papers finding that the majority of investment managers are unable to outperform a simple index fund such as the S&P500.

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