Are professional investors aggressive?

I have been doing research on investing lately because I'm taking interesting courses on them. I know when it comes to personal finance, diversification optimizes portfolio risk with respect to returns.

but if you are someone who gets paid to invest corporate funds, don't you have to invest aggressively,

I have been doing research on investing lately because I'm taking interesting courses on them. I know when it comes to personal finance, diversification optimizes portfolio risk with respect to returns.

but if you are someone who gets paid to invest corporate funds, don't you have to invest aggressively, and take higher risks to anticipate even higher returns to outdo your competitors? can someone explain what a "good" professional investor does? thanks
edit: interesting courses on it**

Best Answer:

rarguile: They are searching for "alpha". Here's the definition:

Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index used as a benchmark, since they are often considered to represent the market's movement as a whole. The excess returns of a fund relative to the return of a benchmark index is the fund's alpha.

If the entire market is going up or down, then the performance of stocks are rising and falling in tandem. Therefore a professional investor isn't doing any thing worthwhile if he can't produce superior results to the makret – as measured by indices.

Hence the search for "alpha" . so you like airlines or oil companies or banks – the key question is which airline will outperform the other airlines – which oil company has better management and will outperform the others – and which banks have a better chance of outperforming the others…

So Ford vs GM vs Fiat vs Tesla
Exxon vs Chevron etc.

So I'd not use the term aggressive – except that the professional is trying to outperform the market without taking excessive risk by selective holdings in targeted industries.

Other answer:

rarguile:
Aggressiveness depends on how you define it. Is it about trading frequency and portfolio turnover? Is it about making concentrated bets? Is it about how much tracking error they have versus the benchmark? Very few investors are aggressive across the board, some on one point, some not at all.

Momentum investors tend to be aggressive.

Growth investors are generally aggressive. Value investors tend to be quite patient.

Thomas Anderson:
I think your initial premise, about diversification optimizing portfolio risk is untrue, because you haven't defined any of your terms.

having a market neutral portfolio optimizes portfolio risk, but also reduces overall returns.

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