What strategy does active investing involve?

Active investing is characterized by the frequent buying and selling of securities with the goal of outperforming the market or a specific benchmark. This strategy relies on research, analysis, and market timing to identify short-term opportunities for profit, rather than just relying on a buy-and-hold approach.

Investors who engage in active investing often study market trends, economic indicators, and specific company performance to make informed decisions about when to enter or exit positions in the market. By trading stocks, bonds, or other securities more regularly, active investors aim to capitalize on market fluctuations, thereby potentially earning higher returns compared to passive investment strategies.

This strategy contrasts with techniques such as simply holding onto securities for the long term, which would be an example of a passive investment strategy aimed at long-term growth without frequent trading. Investing only in index funds or solely in government bonds further emphasizes a lack of active trading, as these approaches focus on consistent, long-term growth with minimal transactions.