Active fund

A fund that tries to beat its index

In detail

An active fund has a manager choosing holdings with the aim of beating the index. Research and trading take people, so the fee is higher than an index fund's. Some years it wins and some years it loses, and studies find many fall short of the index over long periods. When comparing, put performance and cost side by side.

Example

A fee of 1.5% a year means the manager must beat the index by 1.5% just to match it.

Related terms

Index fund Expense ratio Investment fund

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For learning, not investment advice. Decisions are your own.