Home > Glossary > Active investing

Active Investing

Active investing is a strategy where investors or fund managers actively buy and sell securities, such as stocks or bonds, with the goal of outperforming the market or a specific benchmark. Active investors believe that by closely following market trends, economic indicators, and company performance, they can make informed decisions that will yield higher returns compared to passive investing, which simply follows a market index.

Example

A portfolio manager who regularly buys and sells stocks based on market trends and company news is engaging in active investing.

Key points

• Involves frequent buying and selling of securities to outperform the market.

• Requires extensive research and market analysis.

• Typically has higher fees and higher risks compared to passive investing.

Quick Answers to Curious Questions

The goal is to outperform the market or a specific benchmark by making informed decisions on buying and selling securities.

Active investing involves frequent trading based on market analysis, while passive investing involves holding a diversified portfolio that tracks a market index.

The risks include higher fees, potential for significant losses, and the possibility that active strategies may not consistently outperform the market.