Distinguish between active and passive investment.

The major differences between active and passive investment are as follows &mius;

Active Investment

• It is an investment invested after doing independent analysis on value of each investment.

• The main objective is to beat market performance.

• It focuses on absolute terms.

• In view of investor perception, market may be inefficient

• It has higher transaction frequency.

• It has high returns and more risk.

• It has high operating cost.

• It includes short term price fluctuations.

• High skills are required to make decisions.

• It is highly flexible in investing.

Passive Investment

• It is invested after investor portfolio is matched with market portfolio.

• The main objective is to match tracked index.

• It focuses on relative returns.

• In the view of investor perception, market may be efficient.

• It has low transaction frequency.

• It has low returns and less risk.

• It includes low operating cost.

• It has long term investment focus.

• Few skills are required to make decisions.

• It has less flexibility.

Mandalika

Published on 27-Jul-2020 08:15:14

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