Active Management
InvestingGlossary term
Definition
An investment approach where fund managers make deliberate buying and selling decisions to outperform a benchmark index. Active funds charge higher fees than passive funds, and studies show the majority of active managers underperform their benchmarks over time.
Related terms
- Passive InvestingAn investment strategy that aims to match market returns rather than beat them, typically through index funds and ETFs. Passive investing relies on broad diversification and low costs, and research shows it outperforms most active managers over long periods.
- Expense RatioThe annual fee that all funds or ETFs charge their shareholders, expressed as a percentage of assets. Lower expense ratios mean more of your money is invested rather than going to fees.
- BenchmarkA standard index or portfolio used to measure investment performance. Common benchmarks include the S&P 500 for large-cap stocks and the Bloomberg Aggregate Bond Index for bonds.
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