What type of investment strategy involves a portfolio manager choosing securities to replicate a benchmark?

The investment strategy that involves a portfolio manager selecting securities to replicate a benchmark is known as passive investing. This approach is designed to match the performance of a specific market index or benchmark rather than attempting to outperform it through individual security selection or market timing.

In passive investing, the focus is on creating a portfolio that closely mirrors the components of the benchmark index. This is typically achieved through the use of index funds or exchange-traded funds (ETFs), which aim to provide investors with returns that are consistent with the performance of broad market segments, such as the S&P 500 or a specific sector index. The key advantage of this strategy lies in its lower costs, as it typically involves fewer transactions and lower management fees compared to active investing, where a manager would frequently buy and sell securities in an effort to outperform the benchmark.

In contrast, speculative investing involves taking high risks with the expectation of substantial returns, while active investing focuses on identifying opportunities that can lead to higher returns than the market. Reactive investing implies making investment decisions based on news or market events, which contrasts with the more methodical approach of passive investing.