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.
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Finance: What is Closet Indexing?0 Views
Finance a la shmoop what is closet indexing? shirts here shoes there
panties um sorry what's that doing there [Man holding a pair of panties]
underwear...those aren't mine really okay it's not referring to a
literal closet, closet indexing is a financial strategy that professional
investment managers aren't all that proud to be doing hence they keep their
activities in the closet and it's you know like this guy yeah if that's one of [Man appears behind rack of shirts]
them closet index are you.. most investment managers performance is
pegged to a given investment index like the S&P 500 or the Russell 2000 or the
30-year US government paper so if a manager was indexing to the Dow Jones
average well, they'd note the 30 stocks in it like
these...... and their closet [List of Dow 30 stocks]
indexed portfolio would just riff off the stocks in the rough weighting
amounts that comprise the Dow like here's Microsoft but they might have in
their portfolio a tenth of a percent more in Microsoft than is in the Dow
index because they are slightly less bearish about the future prospects of
the once-great company you know then the rest of the street has and they might [People purchasing stocks]
have a bit less oil because well they drive a Tesla and they think everyone
well they just should and by keeping their portfolio very close to their
index well they're never heroes they're never goats, they just keep their jobs
going along collecting their salaries and they live to you know dress another
day... [Girl trying on clothes and man walks by]
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