How finance folk use it
In finance, active management is an investing strategy in which you constantly buy assets for and sell assets from your portfolio.
The objective is to react quickly to market movement so you can earn from the trades you make.
Is it good or bad?
Active management allows you to take advantage of opportunities when you see them. However, you’ll have to put in some effort to do it properly.
This management method will have you spending a lot of time watching the market in order to see the latest developments. You’ll also need a lot of knowledge so you can analyze the news properly and see how to react to it.
Compared to passive investing, the potential for returns is higher. However, you’ll be spending more on fees, since you’ll be buying and selling a lot, and facing more risk.
What it means for you
Active management is a strategic option for your portfolio. You can even consider combining it with a passive strategy to get the best of both worlds, if you have more than one investment product.
If you feel that you don’t have the necessary experience or can’t put in enough time, you have the option of investing in a pooled fund (like a Unit Investment Trust Fund) that is actively managed. That way, the manager will take care of the research, monitoring and decision-making for you.
