Active vs. Passive
Active funds try to beat the market; passive funds try to match it cheaply. Here is how they compare on cost and results, and where each approach can make sense.
Two approaches
| Passive (index) | Active | |
|---|---|---|
| Goal | Match an index | Beat an index |
| Typical yearly cost | Often under 0.1% | Often 0.5% to 1% or more |
| Turnover | Low | Higher |
| Tax efficiency | Usually high | Often lower |
General features; individual funds vary.
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