Top 6 Benefits Of Active Management

Top 6 Benefits Of Active Management - Moniedism

Learn the 6 benefits of active management, investment trust and management methods.

Investment trusts (fund) have become a familiar presence for individuals to easily start. It can be purchased at banks and securities companies, and you can start with less risk with a small amount of money. It is a product that is easy for beginners to start because the operation is done by specialists.

There are many funds in the world, but did you know that there are two types of investment methods?
Here, we will focus on active management and passive management, which are investment trust management methods.

Read More on Passive Management: Top 7 Benefits of Passive Management

What is an investment trust in the first place?

An investment trust (fund) collects money collected from investors into one large fund, and investment specialists invest and manage it on behalf of investors. Professionals collect information and select stocks, and the investment results are distributed according to the investment amount of each investor, so even beginners can easily start using this product.

It is important to note that the principal is not guaranteed, but since each fund has its own investment results, it is possible to choose a product that suits your risk tolerance.

Features of active management

Active management is an investment method that aims for investment results that exceed the benchmark market index (NASDAQ, SENSEX, etc.). It is done at the discretion of the manager in accordance with the management guidelines for each fund.

Whether the market as a whole moves up or down, we always look for and invest in stocks whose stock prices will rise in the future. Compared to passive investment, this is an investment method that can aim for positive price increase profits.

6 points for active management

Unlike passive management, active management is operated at the discretion of the operator.

So what are the advantages and disadvantages of active management?
Here, we will introduce 6 points of active management. Please take a look to find the investment trust that suits you.

Active management point 1: It is easy to expect a large return

It is said that active management is more likely to expect larger returns than passive management.

In active management, stocks that are expected to rise in stock price are investigated and analyzed using a top-down approach and a bottom-up approach and are carefully selected by professional managers. Therefore, if the market rises as expected, it is more likely to get a larger return than passive management aiming for an average value.

Active management point 2: Risk hedging to reduce losses may be performed

The market is fluctuating due to various factors, but environmental factors and political factors can also cause large unpredictable fluctuations.

In active management, fund managers conduct daily research and analysis, so risk hedging may be performed to minimize losses against market declines.

Even if there is a temporary big drop, it may be possible to recover faster than the market with the help of the fund manager.

Active management point 3: Good compatibility with small and medium-sized stocks

Active management is said to be compatible with small and medium-sized stocks. This is because active managers are constantly checking the future.

In active management, individual stocks are thoroughly researched and analyzed, focusing on the potential for growth of companies with strengths that are not affected by the market environment. Therefore, we may have many small and medium-sized stocks that are expected to grow compared to large-cap stocks.

Active management point 4: High cost of operation

Compared to passive management, active management buys and sells stocks more frequently according to market trends. In addition, since the manager conducts research analysis and investment decisions, each of them costs money. Therefore, management fees are often set higher than passive management.

It is also important to determine if the costs and operational outcomes are balanced.

Active management point 5: Find a highly capable fund manager

The investment results of active management depend on the skill of the fund manager who is the manager.

It is the fund manager who researches and analyzes the market, selects individual stocks, decides the investment ratio, and makes actual investment decisions while paying attention to market trends. In some cases, the return on investment is higher than in passive management, but not all are successful.

Therefore, it is also important to find a fund manager who has abundant investment experience and is good at making investment decisions.

Active management point 6: Risk is relatively high

Active management is actively seeking investment effects. Therefore, as mentioned above, the high cost is one of the risks. The method adopted by the fund manager may not suit the market situation at that time.

It is not possible to always select only the stocks that will increase in price, and sometimes the selection is wrong, so the investment results may fall below the benchmark. It is necessary to understand these risks and select a fund with a convincing investment policy.


In addition, the cost of active management is relatively high, and the operational results are not necessarily great. One way is to check the investment performance of each fund and invest in a small amount while watching the situation.

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