Active Risk

Filed Under » , ,
Dictionary Says

Definition of 'Active Risk'

A type of risk that a fund or managed portfolio creates as it attempts to beat the returns of the benchmark against which it is compared. In theory, to generate a higher return than the benchmark, the manager is required to take on more risk. This risk is referred to as active risk.
Investopedia Says

Investopedia explains 'Active Risk'

The more an active portfolio manager diverges from a stated benchmark, the higher the chances become that the returns of the fund could diverge from that benchmark as well. Passive managers who look to replicate an index as closely as possible usually provide the lowest levels of active risk, but this also limits the potential for market-beating returns.

Articles Of Interest

  1.

    4 Steps To Building A Profitable Portfolio

    This is a step-by-step approach to determining, achieving and maintaining optimal asset allocation.

  2. Beta: Know The Risk

    Beta says something about price risk, but how much does it say about fundamental risk factors? Find out here.

  3. Make Your Portfolio Safer With Risky Investments

    A high-risk security can reduce risk overall. Find out how it works.

  4. Modern Portfolio Theory: Why It's Still Hip

    See why investors today still follow this old set of principles that reduce risk and increase returns through diversification.

  5. Tailoring Your Investment Plan

    Start your own investing adventure with the help of some simple guidelines.

  6. What should I use as a benchmark for my small-cap stock portfolio?

    When creating a stock portfolio, it is important to have a benchmark against which you can compare your returns. Comparing against a benchmark allows an investor to accurately gauge the actual ...

  7. Introduction To Treasury Inflation-Protected Securities (TIPS)

    If you want to protect your portfolio from inflation, all you need are a few TIPS.

  8. 6 Asset Allocation Strategies That Work

    Your portfolio's asset mix is a key factor in whether it's profitable. Find out how to get this delicate balance right.

  9. How To Cut Your Mutual Fund Fees By Up To 90%

    Most mutual funds don’t come close to beating the indexes they’re compared against. And yet they carry steep fees for active management. Find out how a little research and effort can cut your ...

  10. A Top-Down Approach To Investing

    Use a global view to determine which stocks belong in your portfolio.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...

  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center