Active vs Passive Investing: What's the Difference?
An index provider writes the list by published rules.
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1.How does a passive fund choose investments?
An index provider writes the list by published rules.
2.What is a benchmark?
Earning five percent is a win if the benchmark earned two, and a miss if it earned eight.
3.What is the expense ratio, per the SEC?
The fund pays these costs from its own assets, so you pay them indirectly through lower returns.
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Sources (4)
- Sharpe, W. F.: The Arithmetic of Active Management, Financial Analysts Journal 47(1), 7-9 (January/February 1991)
- S&P Dow Jones Indices: SPIVA U.S. Scorecard, Mid-Year 2025 (Daten
- SEC Office of Investor Education and Advocacy: Investor Bulletin: Mutual Fund Fees and Expenses (SEC Pub. No. 162, 5/14)
- Eigene Rechnung: Leo (aktiver Fonds)
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