Active management is usually used with investment companies offering mutual funds and similar types of investments. They hire groups of Type-A money people in fancy suits. These portfolio managers and analysts drink a lot of coffee, read a lot of money-related reports and forecasts, and look at a lot of charts to try to figure out how to pick stocks and investments that outperform their return targets.
Passive management, BTW, is the opposite. Usually it's a thing with ETFs and index funds, where a bunch of stocks are picked because they are all linked to a specific area (like tech, for example). Nobody spends time trying to figure out what to buy. Instead, the investments are sometimes rebalanced to make sure they still match up what they're supposed to represent. One money guy with a computer can usually handle investments in a passive management style.
Related or Semi-related Video
Finance: What is the Russell Index?4 Views
What is the Russell Index? Well it's an index like a stock
index abroad one the Russell is actually a series of
various indices that track the progress or lack thereof of stocks in a given
sector or basket like many indices the Russell index is actually owned and/or
managed by the footsie or f TSI based in London that's the financial time stock [sky scraper in London]
index F TSI footsie and the indices come in all kinds of flavors with an example [ice cream counter]
right here where you can see funds with catchy titles like the Russell 3000
growth and the Russell 1000 value and the Russell mid cap yeah the Russell
micro cap and the anemic Russell top 200 it's only 200 companies there and that
top 200 yeah no relation to top gear the video Yelp of cars alright well why do [Top Gear website with Nissan Leaf charging]
we need yet another set of indices well we already have the Vanguard series
featuring the famous ticker s py or S&P 500 we have the Wilshire 5000 which
isn't really 5000 and we have a bunch of others each of which give market
insights from slightly different lenses like that and that and yeah that well [microscope, magnifying glass]
the answer because investors are willing to pay for those insights and/or invest [money passing hands]
in those index funds and will likely keep doing so until there's no more [money piling up]
money to be made at which point everything gets renamed to being an out
Dex
Up Next
What is Closet Indexing? In the mutual fund arena, funds are usually active, meaning there is a highly paid fund manager calling the shots, or pass...
What is the Barron’s Confidence Index? The Barron’s Confidence Index compares the yields of the highest graded bonds to intermediate graded bon...
What is a Country Basket (Index Fund)? Investing internationally can be a challenge, as foreign exchange, different accounting rules, time zones an...
What are Active Investing and Active Management? Active investing means exactly what it sounds like. The investor is actively buying and selling, a...