Chartered Institute of Stockbrokers (CISI) Professional Practice Exam 2025 - Free CISI Practice Questions and Study Guide

Active management in investment strategies involves ongoing monitoring and adjustments to a portfolio to respond to market conditions, economic developments, and changes in individual securities' fundamentals. The primary goal of active management is to outperform a benchmark index by making calculated investment decisions based on research, analysis, and forecasts.

This approach is characterized by frequent trading, where portfolio managers actively buy and sell assets to capitalize on perceived market inefficiencies or changes in asset value. By continuously assessing the portfolio's performance and the external environment, active managers aim to take advantage of market trends and timing to maximize returns.

In contrast, other strategies focus more on passive investment or cost minimization, which do not align with the active management philosophy. For example, simply buying and holding investments for a long period, investing solely based on historical performance, or minimizing trading to reduce costs do not involve the same level of engagement or tactical decision-making that active management requires.