Enhanced Index Investing Based on Goal Programming By Wu, Liang-chuan (7 March 2008) 79625103 Donald The speaker Wu talked about the active management versus the passive management. He told us some comparison of them. Active management: The aim of an actively managed fund is to achieve returns that, over the long term, are better than those of a specified benchmark. The benchmark may be an index reflecting the performance of a particular investment market or the average return of similar funds. Active managers seek to outperform the benchmarks of their funds by dedicating substantial resources to researching economies, industries and companies. The attraction of active management is the potential for achieving investment returns that are higher than those of the fund's benchmark. Passive management: The aim of a passively managed fund is to achieve a return as close as possible to a particular benchmark. Passive management is often also known as index tracking, since the benchmark followed is typically an index. The attractions of passive management are that the fees tend to be lower than those for active management, and investment returns will broadly reflect those of the market. However, there is also no opportunity to benefit from active investment returns which could be higher than the index When I was study in college, I took a class about stock investing. The speaker works in China Trust Bank as a fund manager. He told us that if we want to buy some stocks, as a freshman in stock market we should use passive management. He said that after our careful thinking, he suggest us that after we buy the stock we do not need to pay attention to it everyday. We just need to look it once a week. The main thing is told us not to be too sad or happy in the gain and loss. And for speaker Wu’s speech, he showed us that “Active managers don’t add value (Miller, T., and T.S. Meckel. “Beating Index Funds with Derivatives.” The Journal of Portfolio Management May 1999. pp. 75-88).” And most of the active funds fail to beat the market (Treynor & Mazuy [1966]; Jensen [1968]; Bogle [1998]; Seksaria [1998]) Now a day, I study the stock market with my father. Every time I go home, we will discuss some about his recent investment. Actually I learn much more things from my dad than from the school. And my mom chose to buy some fund instead of the stocks. She uses these ways to invest the foreign stock market. My dad and I had talked about the Taiwan 50. So that is why I can ask Dr. Wu about the difference between his research and Taiwan 50.
The main feeling for me in investing stock market is that I won’t try to buy some area that is not familiar to me. So I would focus my mind on the stock about technology. That is what I am good at, that is what I know more about it. I know nothing about the bank, so I won’t buy it. Even I don’t have any money to buy the stocks, but I am accumulating my knowledge about them. It is a long way to go.