They differ in both tasks

Passive approach to portfolio management is based on the principle of "following in the footsteps of the market." The practical realization of this principle means that the restructuring of the securities portfolio must clearly reflect the trends in the securities market as the overall volume (based on the general market indices dynamics), and composition. In other words, the dynamics of the portfolio securities of the bank in a miniature copy to the dynamics of the securities market as a whole. The focus of the passive approach to portfolio management is being given to the restructuring of types of securities, and its profound diversification. Passive management policy includes: the formation of a passive portfolio, buying securities whose motion corresponds to motion of the entire market, the absence of significant turnover on the sale of securities in its portfolio, more long-term investment, a high level of portfolio diversification, a small fraction of individual securities is dispersed portfolio risk, minimum cost for analytical support, on payment of commissions to brokers. Before passive approach characterizes the formation of the conservative mentality of the portfolio. Category: Management Operations Commercial Bank