Write a mini essay on the active verse passive management debate

Active investment is focused upon continuous reshuffling of portfolio into various sectors according to the need of the market and it will be continuously trying to outperform the market and it will also have a higher amount of Management fees. Active investment will be looking for higher degree of portfolio outperformance than the market rate of return, it always look for generation of Alpha.

Passive management focus upon the theory of Efficient market hypothesis which will always be advocating that portfolio should be constructed in respect to the market and it will be trying to replicate the index and it will be trying to synchronise the rate of return of the market so it will never look for outperforming the market rate of return.

Those Investors who are having a very high degree of risk aversion should be going for passive investment whereas those investors were having a low degree of risk aversion and should be opting for the active investment.

Active management have higher degree of volatility and risk whereas, passive management will have a lower degree of volatility and riskm