Style investing is an active management strategy whereby an investor overweighs their portfolio to growth or value stocks in an attempt to outperform the broad market.
There is always debate among investors as to whether style investing using index funds or a style-based asset class fund is an active management strategy or a passive one.
In a similar fashion, you can create a broadly diversified portfolio but choose an active management strategy instead of simply buying and holding to track the major indexes (which is passive management).
Further an active risk management strategy has resulted in reducing the cost volatility.
Asset managers earn a markedly higher advisory fee from active investment strategy and rightly so as active management relies on the skill of the asset manager which needs to be duly compensated with a higher advisory fee.
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If active management were a viable investment strategy, it should reliably outperform a purely passive index.
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There is, however, a strategy that combines a little active management with the passive style.
This passive asset allocation strategy has a long history of outperforming most active management strategies that try to time markets.
"Pre-Lehman, the focus was on asset allocation" and a diversified approach to active management, says London Business School professor Elroy Dimson, who is also head of the Strategy Council for the Norway fund.
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