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Active Portfolio Management : A Quick Overview




Active portfolio management is an investment strategy where portfolio managers actively make investment decisions to outperform the market or a specific benchmark index. Here's a simplified explanation:

 

Investment Selection:

In active portfolio management, portfolio managers actively select investments based on their research, analysis, and market outlook.

 

Market Timing:

Active portfolio managers may adjust their investment allocations based on their assessment of market conditions, economic trends, and geopolitical factors.

 

Risk Management:

  • Active portfolio managers actively manage portfolio risk by diversifying investments across different asset classes, sectors, and regions.

  • They may employ hedging strategies, such as derivatives or options, to mitigate downside risk and protect against adverse market movements.

 

Performance Monitoring:

  • Active portfolio managers continuously monitor portfolio performance and make adjustments as needed to capitalize on investment opportunities or mitigate risks.

  • They analyze market data, company financials, and other relevant information to inform their investment decisions and adjust portfolio allocations accordingly.

 

Benchmark Comparison:

  • Active portfolio managers benchmark their performance against a relevant market index or peer group to assess their success in generating alpha, which is the excess return earned above the benchmark.

  • They strive to outperform the benchmark over time, but it's important to note that not all active managers succeed in consistently beating the market.

 

Fees and Costs:

  • Active portfolio management typically incurs higher fees and expenses compared to passive investment strategies, such as index funds or exchange-traded funds (ETFs).

  • Investors pay for the expertise and active decision-making of portfolio managers, which can impact overall investment returns.

 

Investor Involvement:

Investors who opt for active portfolio management delegate investment decisions to professional portfolio managers, trusting them to make informed decisions on their behalf.

 

In summary, active portfolio management involves active decision-making by portfolio managers to select investments, adjust allocations, and manage risk in an effort to outperform the market or benchmark index. It requires ongoing research, analysis, and monitoring to identify opportunities and adapt to changing market conditions. However, active management comes with higher fees and may not always outperform passive investment strategies in the long run.

 
 
 

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ESTABLISHED 

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PINNACLE WEALTH

Diversify and scale your investment portfolio through a large selection of Private Market Investments, Public Market Investments, and Insurance Strategies.

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Pinnacle Wealth Brokers Inc. (“Pinnacle”) is registered as an Exempt Market Dealer in the provinces of Canada. Pinnacle is also registered as a Portfolio Manager in BC, AB, MB, SK, QC and ON and as an Investment Fund Manager in AB, ON and NL and QC. Pinnacle provides private investment opportunities to qualifying Canadians through a network of trained, registered dealing representatives throughout the country. This information does not constitute the sale or purchase of securities. This is not an offering of securities. Offerings are made pursuant to an offering memorandum and only available to qualified investors in jurisdictions of Canada who meet certain eligibility or minimum purchase requirements. The risks of investing are outlined and detailed in the applicable offering memorandum and you must review the offering memorandum in detail prior to investing. Investments are not guaranteed or insured and the value of the investments may fluctuate.

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