Active Management -- Investment Management on the part of a Portfolio Manager who decides actively when to buy and sell securities in order to maximize Return. The reverse is Passive Management, in which a money manager supervises an unchanging portfolio that is built up in order to move in correspondence with the general performance of the market or a chosen segment of it a tactic that is called Indexing.
In Passive Investing, individuals buy an Index Fund or place money in a Limited Partnership that is viewed as passive by the IRS. If an Investment Counsel is authorized by a client to decide where to put the client's money in passive investments, then the former is carrying out active management. Active management may or may not hold for passive investments. While an index fund may be under passive management, a limited partnership involved in business dealings is under active management.
In bond transactions, active management refers to a plan of purchase and liquidation of bonds before their maturity.
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