Question

25. Researchers find that actively managed equity mutual funds in U.S. do not outperform their benchmarks on average. Based on this evidence, would you adopt active or passive portfolio management strategy? Why?

Answer 1

if you scan through the mutual fund performance. you are likely to see the vast variance in the performance of these funf.the return was not able to outperform the benchmark.there are a number of factors that determine active or passive portfolio managament.wheich mainly depend on the individual.

passive and active investment strategy are the two main strategies that can be used to generate a return on their investment.

the active management goal is to outperform the market benchmark, they choose a specific benchmark and try to outperform the benchmark.

passive portfolio managers focus on inviting In a particular index in order to achieve similar results. they mainly focus on investment kike mutual fund,exchange-traded fund, etc.

one of the main reasons why passive investment is not proactive is because the cost associated with managing the funds may be high. which eat many of our gains and which will affect our compounded rate as well.

but passive investment like exchange-traded funds has less cost comparing a high-end mutual fund. and past data also indicate that mutual fund is not able to beat the benchmark.but if you are investing in an exchange-traded fund, the cost is low plus you are actually investing in a particular asset class linked with ETF.

choosing between active and passive investing depend on the individual,there are many passive investments strategies which result in good output and results comparing to other passive investment plans like mutual fund.passive also involves less buying and selling and involves investor buying index funds, etc