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INVPR038 Active or Index Funds: What’s Your Best Bet? (415 words)
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Description
Is it worth paying more for active investment management? In this article we explore the intricacies of investing by comparing active management and index funds. We uncover the factors influencing fees and performance dynamics, gaining valuable insights for informed investment decisions.
Introduction
Ever glanced at a list of different managed funds and wondered why some have remarkably low fees compared to others? Chances are, the ones with lower fees are index funds, also known as passive funds.
Over the last couple of decades, index investing has become increasingly popular, with big players like Vanguard and Blackrock managing trillions of dollars in assets (as of 2022).
Before we dive into the reasons and consequences of this trend, let's break down the two main investment styles:
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