Active management is an approach to investing which maintains that portfolio managers can produce greater returns for a given strategy than can be achieved through passively holding all stocks in the market or holding a given index. Often, active portfolio managers will take advantage of perceived opportunities by holding a more concentrated portfolio of securities and trading more frequently than a passive broad market portfolio.
Active investment decisions are made based on varied criteria. For example, value-based active managers tend to make investment decisions based on a company’s shares reaching a specific price, a level at which the manager perceives value. For other active managers, buy and sell decisions may have nothing to do with the performance of a specific stock but rather are triggered by overall market or changing macro-economic trends. Active investors range from those involved in day-trading to those who make far less frequent shifts in their portfolios.
Our experience at Covestor has demonstrated multiple examples of managers who have developed compelling investment portfolios capable of adding value. Many of these managers have delivered excess returns in their personal portfolios for decades, and they are now beginning to do so for our clients. Among the edges that Covestor managers aim to capitalize on are the following:
Many individual investors find it tricky to implement an active strategy in their own portfolios. They either don’t have the time or the expertise to make active trades, or haven’t found a money manager they fully trust or believe in.
Our goal is to provide low-cost access to talented global investment managers without paying for an expensive financial adviser. Covestor provides a source of active managers with varied goals and strategies.
For further reading on this topic, check out Smarter Investing′s blog article on active versus passive management here.