Chartered Institute Of Stockbrokers (CISI) Professional Practice Exam

Active investment strategies are characterized by the objective to outperform a specific market index or benchmark. Investors employing active strategies engage in extensive research, analysis, and trading decisions aiming to identify undervalued securities or favorable market conditions to gain higher returns than the overall market. This involves frequent trading and adjusting portfolio allocations based on market trends and economic indicators, thus actively managing the portfolio. In contrast, passive investment strategies focus on replicating market indices, with minimal trading activity. These approaches typically involve buying and holding a diversified set of securities that aim to mirror the performance of a market index, rather than trying to beat it. Therefore, the pursuit of excess returns relative to a benchmark through active management clearly differentiates active investment strategies from passive ones.