Active management is a type of investment strategy where portfolio managers attempt to generate alpha through active buying and selling of securities. Active managers believe that they can add value to a portfolio by making decisions about which securities to buy or sell, and when to do so. Many investors choose to use active management in order to achieve superior returns relative to the benchmark index. However, active management comes with higher fees and expenses, as well as the potential for underperformance.
While there are many different ways to measure success in active management, outperforming the benchmark index is one of the most common goals. In order to achieve this, portfolio managers must have a deep understanding of the markets and a skillful hand at picking stocks. Many investors are hesitant to use active management due to the high fees and the potential for underperformance.