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What is the difference between passive and active investing in index funds?

Curious about index funds

What is the difference between passive and active investing in index funds?

The main difference between passive and active investing in index funds is the approach taken to manage the portfolio.

Passive investing involves investing in index funds that simply track a particular market index, such as the S&P 500 or the Dow Jones Industrial Average. These funds do not try to outperform the index, but rather aim to match the returns of the index by holding the same stocks or securities in the same proportions as the index. Passive investing is often associated with low fees, as there is no need for active management.

Active investing in index funds, on the other hand, involves using a more handson approach to try to outperform the market. Active fund managers may make adjustments to the fund's holdings in an attempt to take advantage of market trends or to avoid sectors that they believe will underperform. Active investing generally involves higher fees than passive investing, as there is more research and analysis involved.

In summary, passive investing involves a "handsoff" approach, while active investing involves a more handson approach.

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