Canadian Securities Course (CSC) Level 2 Practice Exam

The chosen answer is correct because the active strategy is specifically designed to outperform a benchmark portfolio through individual stock selection and extensive research. Active investors analyze various factors such as company performance, industry trends, and economic indicators to identify stocks that are expected to perform better than the market, seeking to achieve higher returns.

In contrast, a passive strategy typically involves investing in a diversified portfolio that mirrors a benchmark index, aiming to match market performance rather than exceed it. This approach relies less on personal investment research and more on a set-and-forget philosophy in order to minimize costs associated with frequent trading.

While value and growth investing strategies are also targeted approaches, they each define specific investment philosophies—value investing focuses on undervalued stocks with potential for growth based on fundamental analysis, and growth investing concentrates on stocks expected to grow at an above-average rate. Neither of these strategies inherently seeks to outperform a benchmark through extensive trading and research in the same way an active strategy does.

Thus, the active strategy stands out as the one that fundamentally seeks to beat market returns by leveraging detailed stock research.