Active management

A fund manager, or you, picking specific investments in an attempt to beat a benchmark.

Example

A fund manager choosing forty stocks they believe will outperform a broad index.

Important

Beating the market after fees, consistently, is rare - most actively managed funds underperform their stated benchmark over long periods.

Related terms

• Passive management — Buying a broad, pre-set basket of investments, an index, rather than trying to pick winners.
• Expense ratio — The annual fee a fund charges, expressed as a percentage of the money you have in it.
• Index fund — A fund built to track a market index, such as a broad stock index, rather than to beat it.

Lessons that explain it

• Active versus passive investing — Trying to beat the market versus simply owning it. One costs more and rarely wins; the other is unglamorous and usually does better after fees. (11 min)

All 578 terms in the Investing glossary