Chartered Alternative Investment Analyst Association (CAIA) Exam 2025 – 400 Free Practice Questions to Pass the Exam

Active management in investments is characterized by the buying and selling of securities with the aim of maximizing returns. This strategy involves portfolio managers making informed decisions based on analysis, research, and market forecasting, seeking opportunities to outperform a specific benchmark or index. Active managers often rely on their knowledge of market conditions, economic indicators, and individual company performance to identify mispriced securities or advantageous market conditions, thus actively adjusting their portfolios to capture potential gains.

In contrast, other approaches, such as passive holding of securities, automated trading, and investing in index funds, do not involve the same level of strategic decision-making toward maximizing returns. Passive investment strategies typically involve holding a diversified portfolio over the long term without frequent trading, aligning more with a buy-and-hold approach that mirrors the performance of a market index rather than seeking to outperform it.