Navigating success: portfolio management through risk and performance analysis

Abstract

Purpose – this study explores the growing interest in Exchange-Traded Funds (ETFs) and public shares during and after the COVID-19 pandemic, aiming to understand the factors driving this investment trend. Research methodology – an actively managed portfolio of U.S. stocks is constructed and compared to a passively managed S&P 500 index portfolio. Active management is conducted using three approaches: intuition-based selection, the Black-Litterman model, and Modern Portfolio Theory. A quantitative analysis assesses risk, performance, and the impact of rein- vestment and transaction costs. Findings – results show that active investing can outperform passive strategies in the short term but involves higher risk, transaction costs, and ongoing oversight. Passive investing offers stability and lower costs but may yield lower returns during volatile periods. Research implications – the study deepens understanding of how costs and reinvestment in- fluence investment outcomes and how active and passive strategies perform under varying market conditions, especially post-pandemic. Practical implications – the findings provide practical guidance for portfolio construction and management, helping investors balance risk and return in a changing financial landscape. Originality/Value – this paper uniquely compares three active investment approaches against a passive benchmark within a post-COVID context, offering integrated insights on performance, cost, and strategy for both academics and practitioners