Managed vs Index Funds

Managed investments and indexed investments differ in terms of their approach to portfolio management and investment strategies.

Managed investments, such as mutual funds and some ETFs, are actively managed by a professional portfolio manager who aims to outperform the market or a specific benchmark. The portfolio manager makes investment decisions based on their analysis of market trends, economic conditions, and company performance. The portfolio may be adjusted frequently in an attempt to capitalize on market opportunities and avoid potential risks. Managed investments generally charge higher fees than indexed investments because of the active management and research involved.

Indexed investments, such as index funds and most ETFs, seek to track the performance of a particular market index, such as the S&P 500 or the Dow Jones Industrial Average. Rather than attempting to outperform the market, indexed investments aim to replicate the returns of the index they track. They do this by investing in the same securities that make up the index in the same proportions as the index. Because indexed investments require less active management and research, they typically have lower fees than managed investments.

In summary, managed investments aim to beat the market through active management and research, while indexed investments aim to replicate the market returns by investing in the same securities that make up the market index. Index Funds have historically outperformed managed funds.