... of the index, the fund places 3% of its money in J.P. Morgan Chase stock. Passive portfolio management involves a buy and hold strategy that is buying a portfolio of securities and holding them for a long period of time. Passive portfolio management have two conditions that need to be satisfied: * Market Efficiency - EMH * Homogeneity of expectations.2 If markets are efficient, then security prices change instantaneously and fully reflect all relevant available information. All security prices will be fairly priced at all times and no misvaluation, so there is no incentive to actively trade. On the other hand Active portfolio involves frequent and often substantial adjustments to the portfolio as active managers believe that the prices are not continuously efficient and that they can profit from misvaluation of priced securities. There are three stages in active management. The first stage is asset allocation. At this stage the portfolio manager decides what proportions of ...

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