Question

an investment strategy is a set of rules, behaviors, or procedures designed to guide an investor’s portfolio selections. The strategy is designed around the investor’s risk-return trade. Are active investment strategies more effective than passive strategies? Why or why not?

Identify and discuss an investment strategy (rule, behavior, or procedure) that you believe is important. Determine if it is passive or active and explain why.

Answer 1

In an active investment strategy, an investor or the investment manager keeps a close eye on the market and stock movement and shuffle the stocks frequently. They buy the stocks when they see they are trading undervalued or worth buying because of potential to increase the price and sell the stocks when the investor does not see any further growth in the prices. The churning of stocks ensures that the portfolio will generate a better return. In the passive investment strategy, the investor or the investor manager invest in the portfolio that resembles stock indices and does not buy and sell frequently. An active investment strategy is more effective than the passive strategy as active strategy helps investors grabbing the opportunities and generate extra returns.

I believe in active investment strategy which includes selecting the stocks based on preference and risk level, following market trends and try to outperform the underlying stock index.

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