Can anyone explain point no 1.
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The fundamental law of active management is a principle in finance that suggests that the performance of an actively managed portfolio is determined by two factors: the skill of the portfolio manager and the level of risk taken on by the portfolio. This law assumes that investment decisions are independent and that the performance of one investment does not affect the performance of others in the portfolio. However, in reality, investment decisions are not always independent, and there are several limitations to this law.
limitation of the fundamental law of active management is that it assumes that all investments are independent and that the performance of one investment does not affect the performance of others in the portfolio. In reality, many investments are interdependent and can be affected by market conditions and other factors that are beyond the control of the portfolio manage