This document discusses passive and active strategies for investing in common stocks. It describes passive strategies as those involving limited buying and selling with a long-term focus on appreciation. Key passive strategies mentioned are buy-and-hold, where an investor purchases a stock without selling until objectives are met, and index funds, which track major stock indices. Active strategies aim to benefit from short-term price fluctuations by continually monitoring and rapidly trading stocks. Sector rotation is an active strategy that shifts weights between industry sectors to take advantage of anticipated performance changes.

1. PRESENTED BY
 SAMI UR RAHMAN
 IHSAN ULLAH
 MUDASSIR
 SAYAF
MBA 7th
ABDUL WALI KHAN UNIVERSITY
MARDAN

2. INVESTMENT AND PORTFOLIO
MANAGEMENT
Lesson no# 22
Common stock: Analysis and Strategy

3. PASSIVE STRATEGY
 Some investor use passive strategy to own and to
Manage the portfolio or common stock
 A strategy involving limited ongoing buying and
selling actions.
 Passive investors will purchase investments with
the intention of long-term appreciation and limited
maintenance
 They don’t seek to out perform the market, but
simply to do like market doing
 It is useful in the efficient market

4. CONTI..
 Investor doesn’t buy and sell the securities
rapidly to get benefit from short term price
fluctuation
 Passive investors instead rely on their belief that
in the long term the investment will be profitable.
 passive investing requires good initial research,
patience and a well diversified portfolio.
 Buy-and-Hold strategy is a passive strategy

5. BUY-AND-HOLD STRATEGY
 It mean that investor simply buy a stock and hold it
till future to meet some objectives
 Investor aims to avoid repetition of transaction
costs, additional search costs etc
 If a security is satisfactory, they keep them,
otherwise they sold or replace with other securities
(incur transaction costs)
 It is applicable for all type of small and large
portfolios

6. INDEX FUNDS
 Investing in an index fund is a form of passive
investing
 They are often called benchmarks and
reconstructed on regular basis by committee
(mostly six months)
 It is effective and inexpensive way to invest
 Index funds are mutual funds that are
designed to track the performance of a
particular index.
 An index fund is an investment fund that
attempts to replicate the performance of a
given index of stocks or some other

7. CONTI..
 when the index decreases in value,
the fund's shares decrease as well, and vice
versa
 It keep the same portion of securities in their
portfolio like actual index
 e.g. Trust 500

8. ACTIVE STRATEGY
 It’s continues and ongoing process of buying
and selling of securities
 The investor assume that the rapid buying and
selling of securities are beneficial than cost
and they trade fast, rather to hold it
 It take benefit form small fluctuation of change
in prices in the stocks
 Investor continually monitor their portfolio, and
highly involved
 Will see their prices many times a day
 Focus on short term profit

9. SECTOR ROTATION
 It is an active strategy that is similar to stock
selection in a group
 It involves shifting sector weights in the
portfolio in order to take advantage of those
sectors that are expected to perform well
 The shifting helps investor to avoid those
sectors, that may be worse in near future
 Investor will check larger groups of stocks

10. CONTI..
 Investor divide stocks in four groups
 Cyclical stocks
 Interest sensitive stocks
 Defensive stocks
 Consumer goods durable stocks
 The shifting depends on the current market
condition
 Each sector reacts differently to the moment
in the economy

11. Question and Answer
THANK YOU