Question

What is the difference between active and passive investment management approaches? Is it possible to “beat the market”?
(200 words)

Answer 1

The Key differences between active and passive investment management approaches are as follows.

Active  investment management approache	Passive investment management approache
1. It is based on independent analysis of each investment.	1. It is based on maching of market portfolio by creating investor portfolio.
2. It focus on absolute returns.	2. It focus on relative returns.
3. Assume market to be inefficient.	3. Assume market to be efficient.
4. It has higher operating cost.	4. It has lower operating cost.
5. High flexiblity	5. Low flexiblity
6. Higher skills are needed to handle.	6. Normal or Little skills are needed to handle.

Yes there may be a possiblity to beat the market but some investment fees, taxes, etc. are to be incurred and higher skills are required to work on this.