Active Index Fund

  

This fund lives in the netherworld between a basic index fund with very little subsequent activity after formation, and an actively managed mutual fund.

An active index fund has a base set of parameters, or an index, it follows. Like the car industry. But every now and then comes along an investment, um, vehicle...which the active index fund manager might want to incorporate into their fund. That is, a segment of the index fund is essentially left open to active management, and yes, we're lookin' at you, Tesla.

Related or Semi-related Video

Finance: What are Active Investing and A...4 Views

00:00

Finance a la shmoop.. what are active investing and active management? Active

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doing something, active as in trying to beat the market by trading stocks active [People riding a bike on stock market appears on board]

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as in humans making decisions often with the help of computers trying to beat

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their index or the overall market ie the S&P 500 that's what we mean by the

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market active; investing.. active; management okay

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passive just passive.. active is what hedge funds and mutual funds and any

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kind of funds that have a strategy do they actively try to invest money such

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that the performance of their portfolio does better than whatever index or

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benchmark it's measured against and notice were not talking about after-tax [Man discussing active investments]

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performance here because remember every time you trade in a taxable account

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while the attacks men cometh but we won't go there right now..... Your benchmark

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compare is versus the S&P 500 and you manage a broadly based mutual fund the

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passive investing cousin in this investment is an index fund think ticker

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SPY, that's the biggest S&P 500 index fund well index funds are not actively

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managed they are passively managed they just sit there and get tweaked a little [Pile of money grows larger overnight]

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bit each year or really each quarter to kind of mirror the S&P 500 or whatever

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their index is supposed to mirror but they just kind of sit there there's no

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human trying to beat the market they are the market index funds are the

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market and yeah 99% of actively managed funds don't beat the market over any

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extended period of year like five or ten years very few ever beat the market and

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essentially none of them beat the market after taxes so then why would someone

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invest in an actively managed mutual fund when they're paying taxes and

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they're thinking about an index fund as a comparable well basically they're one [Mutual funds on a table and a lollipop appears]

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of these so yeah don't be one of these guys

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