What is the difference between an index fund and an actively managed fund?

An index fund is a type of investment fund that tracks a particular stock market index. This means that the performance of the index fund is based on the performance of the underlying index that it tracks. By investing in an index fund, investors benefit from the diversification that comes with investing in a basket of securities and it removes some of the potential risk associated with actively managed funds. An actively managed fund is a mutual fund in which a manager selects the underlying securities in the fund and actively manages it. This often involves trying to beat the market index that the fund is based on by choosing securities that are expected to outperform the index. Actively managed funds also typically come with higher fees than index funds. The main differences between an index fund and an actively managed fund are the way the investments in the fund are chosen and the fees associated with each. An index fund aims to match the performance of an underlying market index, while an actively managed fund aims to beat the performance of the underlying index. Index funds typically offer lower fees than actively managed funds as they are not managed by a fund manager.

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What is the difference between an index fund and an actively managed fund?

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