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In an efficient market and for an investor who believes in a passive approach to investing, what is the primary duty of a portfolio manager?

A) Identifying undervalued stocks
B) No need for a portfolio manager
C) Accounting for results
D) Diversification

User Nick Alger
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Answer:

The correct answer here would be D) Diversification.

Step-by-step explanation:

According to the efficient market hypothesis , it assumes that prices of stock reflects all the information ( of the past data ) and these information are available to general public , and here it is almost impossible to earn high returns from the stock ( but can only be achieved when low valued or under performing stocks are bought ) .

Passive investment approach is that type of approach where investor wants to earn higher return but with minimum number buying and selling trades. So in these given situations a portfolio manager should look to diversify the investors investment, so that by investing in various asset classes risk can be diversified and low costing could be maintained.

User Shaul Rosenzweig
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