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What is active management?

Active management is the practice of attempting to outperform the market with selection and timing. Active management is a thoughtful and time-consuming approach to investing and is the opposite of Passive management. Active managers seek to outperform the benchmarks for their portfolio by researching and selecting stocks and other assets based on strategies and analysis methods thought to be superior. Continue reading...

What is active money management?

Active management is when an investor or money manager attempts to outperform an index or benchmark, using tactical strategies. Many economists and financial professionals believe that the markets are efficient. This means that all available financial information has already been built into the prices of securities, and that you cannot outperform the market by making specific selections of stocks, timing the market, reallocating your assets regularly, following the advice of market pundits, or finding the best portfolio managers. Continue reading...

What are Actively-Managed ETFs?

At their conception, ETFs only tracked indexes, but today there is also demand for actively-managed ETFs. ETFs tend to look a lot like passive index mutual funds, except that they can trade intra-day like stocks, while mutual funds only settle within 24 hours. In the last decade or so, there has been an increasing market for actively-managed ETFs as well. It is somewhat ironic that the popularity of actively-managed mutual funds has decreased while an abundance of actively-managed ETFs has appeared. The popularity of ETFs has grown enough for fund managers to attempt more and more things. Continue reading...

How Do I Find the Best Mutual Fund?

It requires a great deal of due diligence, but investors should understand that past performance is not indicative of future performance. Focus on experience. In the stock market, as with most things in life, hindsight is 20/20. There are countless lists on the internet with titles like “The Best Mutual Fund Families” and “50 Winning Mutual Funds.” It is important to understand that the names on those lists are a function of hindsight and not foresight. Continue reading...

What is passive investing?

Passive investing relies on market indices and unmanaged approaches to investing, with the idea being that attempting to beat the market is futile, especially if such attempts involve fees and speculation. Passive investing favors buy-and-hold strategies using no-load, low-fee index funds and other securities meant to be held long-term, in a portfolio allocation suiting the investor that will usually be rebalanced over time to prevent overweighting anything. Continue reading...

What is market efficiency?

Market efficiency describes the degree to which relevant information is integrated into the price of a security. With the prevalence of information technology today, markets are considered highly efficient; most investors have access to the same information with prices and industry news, updated instantaneously. The Efficient Market Hypothesis stems from this idea. Efficient markets are said to have all relevant information priced-in to the securities almost immediately. High trading volume also makes a market more efficient, as there is a high degree of liquidity for buyers and sellers, and the spread between bid and ask prices narrows. Continue reading...

What is an Active Index Fund?

Most index funds are known for using a completely passive strategy to track an index, but some take a more active approach. Some mutual funds track an index by passively using algorithms to buy the shares necessary to build a portfolio which closely replicates an index. Such a fund will have low turnover, will only rebalance slightly based on the market cap or other criteria set forth in the prospectus, and will basically ride out all of the ups and downs of the index in a blind faith for the efficient market hypothesis. Continue reading...

Is there a Benefit to Self-Managing?

An investor may be able to save money in management fees self-managing, but there are also limitations and risks. Perhaps the biggest risk is the role that emotion can play in investing. Even the most skilled professionals are tempted by emotions in the market - big declines like the financial crisis can make one second-guess whether the market has hope of recovering, and big gains can create confidence that leads to less prudent risk-taking. Continue reading...

What are Mutual Funds?

Mutual funds are managed portfolios of stocks and bonds, where the portfolio manager uses pooled investor funds to manage the portfolio. In the U.S., the first mutual fund was created in 1924 when three investors in Boston pooled their money and formed the Massachusetts Investors’ Trust. The essence behind Mutual Funds today is the same – a pool of money is collected from a number of investors and then professionally managed. Continue reading...

What is the difference between active and passive money management?

The debate on whether active or passive management is better for investors has polarized many advisors and theorists for years. There are two schools of thought when it comes to long-term investing. One basically states that you should determine a proper allocation of asset classes for yourself, buy index funds to reflect each particular asset class, and possibly rebalance the portfolio periodically. This basically means “set it and forget it,” and the investor must be willing to ignore fluctuations in the markets and maintain a faith in an Efficient Market. Continue reading...

Is there any merit to the momentum theories?

The momentum theory has many fans for its useful and relatively simple nature. The momentum theory basically states that markets which are moving either up or down for some period of time cannot suddenly reverse their course. Utilizing these strategies means jumping on a freight train, riding it for a short period of time, and jumping off before it stops and reverses direction. It is hard to argue with the this one, but it may be hard to find momentum strong enough for an investor’s taste in certain market environments, which might mean spending too much time on the sidelines, and due to the frequent active trading involved, the investor will incur fees and be susceptible to emotions and media hype. Continue reading...

Who Manages ETFs?

Several large and well-known investment banks and companies are major players in the ETF industry. There are several large investment houses which specialize in managing ETFs such as Barclays, ProShares, Vanguard, and Guggenheim Partners, LLC. ETFs are also managed by investment firms such as Schwab, Credit Suisse, and Eaton Vance. Even New York Life’s Mainstay Investments recently acquired Index IQ. The ETF industry has been growing rapidly in the last 10 years, with more investors choosing to use them, more ETFs on the market, and more investment companies choosing to offer them. Continue reading...

What is active trading?

Active trading is the pursuit of returns in excess of market benchmarks. Investors are advised to have a diverse portfolio, to hedge against the risk of seeing future financial plans devastated due to significant losses in one holding. When attempting to diversify, investors will hear from the increasingly popular camp which believes that the best strategy is to use only passive index funds, which follow indexes using computer algorithms and have low expense ratios. Continue reading...

What is Account Activity?

Account activity is any credit or debit activity in a checking or savings account, or investments, withdrawals, dividends or fees in an investment account. Account activity is the transactional history that will appear in ledger statements from a checking, savings, money market, investment, or other kind of financial account. This usually refers to transactions that were originated by the account owner, such as buying and selling securities or withdrawing and depositing in bank accounts, but could also include activity such as dividends, interest, fees, and other sorts of automated activity generated by the custodial institution. Continue reading...

What can I do to make my portfolio grow faster?

If your portfolio isn’t growing enough for your liking, you might need to take on more risk or change your active management company. The answer is surprisingly simple: find good managers, fill your portfolio with more risky assets, and rebalance it regularly. The last point has more of a long-term focus, since harvesting and redistributing the gains of successful investments may stunt the growth, but it could also prevent you from losing as much when the winners experience a corrective downturn. Continue reading...

What is an Investment Manager?

An investment manager’s job is to adhere to the guidelines set forth in a prospectus while directing the decision-making process for a pooled investment company such as a mutual fund. He must remain accountable to the shareholders and observe SEC regulations while attempting to generate the best returns possible. Investment managers direct the flow of assets and trading in an investment account, usually a pooled investment using the funds of various numbers of investors, while seeking to serve the best interests of the investors whom he serves. Continue reading...

What are the Expenses Associated with Buying and Owning Mutual Funds?

Several forms of fees and expenses may be charged to those who own, buy, or even sell mutual funds. With mutual funds, there two types of charges that might be paid by the investor: expenses and fees. Different types of share classes may have different types structures to their fees and expenses. Expenses are the operating costs of the fund company, essentially, and these show up in all mutual funds, usually labeled as expense ratios. The returns reported by the fund will be after expenses. Continue reading...

How old should my portfolio manager Be?

While we do not doubt that a young advisor can be intelligent and helpful, there is really no substitution for experience and tenure. Generally speaking, it’s a good idea to choose a manager who has experienced various market cycles. Younger advisors who have never helped their clients through a recession may not be as humble, prudent, or knowledgeable as ones who have. If you can find an advisor with over 10 years of experience, we would recommend that over an advisor with only 3, all other things being equal. There are advisors and wealth managers with only a few years under their belts but who have learned a lot in a short time. Continue reading...

Who are Some of the More Well-Known Investment Managers?

There have been many notable investors who have withstood the test of time. Of those that are still living, Warren Buffett definitely stands out of the crowd. If you had invested $1,000 with him in 1965, the investment would be worth over $6 million today. Some of those who could be considered in the realm of "founding fathers" of sound investment strategy would include J.P. Morgan, Benjamin Graham (author of the famous "The Intelligent Investor"), and John Templeton. Continue reading...

What is Account History?

Account history is a term especially useful for investment accounts, where transactions beyond a current month or year’s records are useful for reference. Most people are familiar with the transaction history that is available for the current month, quarter, or year on an individual’s savings, checking, and credit card accounts. These are often called “activity ledgers” or something similar. Account history that reaches further back might be more useful for investment accounts, where the current value of investments, and their cost basis, will depend heavily on account history from potentially years in the past. This sort of query can be made easily with online investment account viewing software from a broker or custodian company. Continue reading...

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