Arguments for active management
- A fund manager's experience and expertise are utilised in
selecting the stocks.
- Active managers have more flexibility in stock selection
- Tax management benefits will be better through actively managed
funds
- Ability to buy and sell when required will help in getting rid
of losing investments and buy winning investments
- Not following specific benchmarks will lead to better
management of risk
- Using hedging strategies to safeguard the portfolios
Arguments against active management
- It involves complicated strategies
- Most of the times, actively managed funds will not beat the
market.
- It is difficult to beat the market through technical or
fundamental analysis
- Actively managed funds have more fees than passively managed
funds
- Trading frequently eats up the gains
- Profits depend on the efficiency of the fund manager