Benefits and Limitations of Active Investing
Active investing refers to an investment strategy that involves ongoing buying and selling activity by the investor. Smart beta exchange-traded funds are a cost-effective way for investors to take advantage of active investing by considering alternative factors as opposed to simply tracking a benchmark index, such as selecting a portfolio based on company earnings or some other fundamental approach. Active investing allows money managers to meet the specific needs of their clients, such as providing diversification, retirement income or a targeted investment return. Unlike passive investors, who invest in a stock when they believe in its potential for long-term appreciation, active investors typically look at the price movements of their stocks many times a day. Active investing allows money managers to adjust investors’ portfolios to align with prevailing market conditions.
Breaking Down Active Investing
Active investing is highly involved. Unlike passive investors, who invest in a stock when they believe in its potential for long-term appreciation, active investors typically look at the price movements of their stocks many times a day. Usually, active investors are seeking short-term profits. Smart beta exchange-traded funds are a cost-effective way for investors to take advantage of active investing by considering alternative factors as opposed to simply tracking a benchmark index, such as selecting a portfolio based on company earnings or some other fundamental approach.
Benefits of Active Investing
Limitations of Active Investing
Related terms:
Asset Management Company (AMC)
An asset management company (AMC) invests pooled funds from clients into a variety of securities and assets. read more
Assets Under Management – AUM
Assets under management (AUM) is the total market value of the investments that a person (portfolio manager) or entity (investment company, financial institution) handles on behalf of investors. read more
Financial Crisis
A financial crisis is a situation where the value of assets drop rapidly and is often triggered by a panic or a run on banks. read more
Hedge Fund
A hedge fund is an actively managed investment pool whose managers may use risky or esoteric investment choices in search of outsized returns. read more
Investment Strategy
An investment strategy is what guides an investor's decisions based on goals, risk tolerance and future needs for capital. read more
Long/Short Fund
A long/short fund is a type of mutual fund that takes long and short positions in investments typically from a specific market segment. read more
Manual Trading
Manual trading involves human decision-making for entering and exiting trades, rather than relying on computers and algorithms. read more
Smart Beta ETF
A smart Beta ETF is a type of exchange-traded fund that uses a rules-based system for selecting investments to be included in the fund. read more
Swing Trading
Swing trading is an attempt to capture gains in an asset over a few days to several weeks. Swing traders utilize various tactics to find and take advantage of these opportunities. read more
Tactical Trading
Tactical trading is a style of investing for the relatively short term based on anticipated market trends. read more