Active portfolio management is, in short, an approach used by wealth managers involving investment decisions.
These can be informed by market trends and technical, quantitative and fundamental analysis, with the aim of beating market performance. Below we discuss the benefits of this strategy.
Opportunity for high returns
The core benefit of active management is its potential for much higher returns.
Active portfolio managers identify stocks that are undervalued and invest in them, a strategy that can result in higher returns than the current benchmark index.
Additionally, active managers also aim to avoid investing in stocks that are overvalued to reduce the potential risk of underperforming the benchmark index.
Agility for adjusting to market conditions
An active management strategy also enables managers to adjust to shifting market conditions. Monitoring the market, managers can swiftly respond to any changes like economic indicators, industry-specific news or political events by modifying their investment strategies.
Potential for diversification
A final benefit of an active portfolio management approach is the opportunity it presents for diversification.
Active management allows wealth managers to invest in a broad range of sectors, geographies and industries to create more diversified portfolios.
They can identify opportunities for investment across a diverse selection of sectors like healthcare, energy, technology and consumer staples to effectively reduce the chance of underperformance that can often result from sector-specific risks.
Active managers can also invest in enterprises with different market capitalisations, to improve portfolio diversification for their clients.
If you’re seeking active portfolio management in Chester, touch base with us here at Hartey Wealth Management to discuss your investments.