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Actively Managed Funds

In most actively managed funds, the fund manager makes specific investments with the goal of outperforming a benchmark index. Managers do this by trying to identify investments that they believe will do better than the index. That’s their objective anyway.

Additional Comments:

The truth is, most of them aren’t very good at this on a sustained basis; actively managed funds rarely outperform their benchmark index over long periods of time.

According to the Standard & Poor’s Index Versus Active (SPIVA) quarterly scorecards, which rates index funds against actively managed funds, only a handful of actively managed mutual funds beat S&P’s various index benchmarks.

A big reason is that actively managed funds are usually considerably more expensive than index funds; the expense ratio for an actively managed funds can be a full percentage point or more than its corresponding index fund.

Related Terms:

Index Funds
An index fund is a fund that follows a passive investing strategy, meaning that the fund ...

Exchange-Traded Fund
(ETF) A fund that tracks an index, but can be traded like a stock. Many ETFs ...

Mutual Funds
Mutual funds are the most common type of pooled investment. Funds "slice and dice" many types of ...

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