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evaluate arguments for and aginst active management refer to effiecient market theory? 20 marks

evaluate arguments for and aginst active management refer to effiecient market theory? 20 marks

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Answer #1

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
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