Actively Managed Portfolio
An actively managed portfolio is an investment portfolio where portfolio managers make active and dynamic decisions regarding transactions, selecting and reallocating investments to outperform a benchmark or achieve specific performance objectives. In this context, "active management" implies a more dynamic approach compared to passive management, where investments are held statically to replicate a market index.
Key features of an actively managed portfolio include:
Active Investment Selection:
Portfolio managers actively seek to identify and select financial instruments they believe offer superior return opportunities compared to the market or a benchmark.
Active Asset Reassignment:
Unlike a passively managed portfolio that maintains the same asset allocation for an extended period, an actively managed portfolio may undergo more frequent reassignments in response to changes in market conditions or analysis of opportunities.
Continuous Market Analysis:
Portfolio managers continuously monitor market conditions, economic news, and other factors that can influence investment performance. This analysis is used to make informed decisions.
Objective of Outperforming the Market:
The primary objective is to outperform the return of a benchmark or reference index rather than replicating it. Managers aim to generate alpha, which is a return higher than expected based on the assumed level of risk.
Active Risk Management:
In addition to seeking return opportunities, active portfolio management also involves actively managing risk. Managers aim to limit losses and protect capital in adverse market conditions.
Decisions Based on Fundamental and Technical Analysis:
Portfolio managers may rely on fundamental and technical analysis to make investment decisions, evaluating aspects such as historical performance, company fundamentals, and market trends.
In summary, an actively managed portfolio is characterized by the presence of professionals making dynamic decisions to seek superior returns compared to a benchmark, leveraging market opportunities, and actively managing risk.
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