According to the yield curve strategy reading, the buy and hold strategy is an active strategy.
If we expect the yield curve not to change, we can make a bit more of a return by taking more duration.
Ok here is where I don’t get this part.
When we expect the rates to lower, we take more duration and when we expect the rates to rise, we take less duration, but what I don’t get is if the yield curve is expected to be stable, how are we benefiting from more duration?
With a normal (i.e., upward sloping) yield curve, if you expect the curve to be stable (so that you really don’t care about duration), you get a higher yield with a longer maturity, and a byproduct of a longer maturity is a longer duration.
ok so it’s really about the longer time to maturity
and why do we say that buy and hold is actually an active management strategy and not a passive strategy? what are we doing differently to consider it as an active management strategy