Question

Discuss the pros and cons of active and passive investment management. when and for what reasons might you recommend either of these investment strategies?

Answer 1

Active investment is a form of investment strategy that involves actively buying and selling assets in the hope of making profit and outperforming an index. Passive investment refers toby and hold portfolio strategy for long term investment with minimal trading in the market. The pros and cons of  active aand paassive management is this limits the additional fees that come with excessive transactions . The passive strategy is also more tax efficient .This is because buying and holding results in lower capital gain tax. Therefore passive investors won't have to pay as much in investment related tax. The reasons for recommending these strategie is active investing requires a hands on approach typically by a port foliyo manager or other so called active participant .Passive investing involves less buying and selling and often results in investors buying index funds or other mutual funds.