What is Active management?
Active management is when a fund manager chooses which investments to buy and sell, aiming to do better than a chosen index. The research and extra trading cost money, so active funds usually charge more than index funds. To come out ahead, a manager has to beat the index by more than those extra costs.
Why Active management matters
Knowing whether a fund is active or passive tells you what it is trying to do and roughly what it will cost.
Related terms
Lessons that use this term
- Index funds explained: what they are and how they work
- Investment fees: expense ratios, MERs and what they cost you