Question
How does active management differ from passive management?
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Answer
Active seeks benchmark outperformance; passive tracks the benchmark.
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Question
Why do passive strategies usually have lower fees than active strategies?
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Answer
They require minimal trading and simply replicate an index.
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Question
Why does the portfolio approach evaluate a security by its effect on the whole portfolio rather than on a standalone basis?
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Answer
Because diversification changes total portfolio risk-return.
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Question
In portfolio management, what is the main purpose of the planning step?
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Answer
Set client objectives, constraints, and the IPS.
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