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

An index fund and an actively managed fund are both types of investment funds. Index funds are collections of stocks or bonds that track an index, while an actively managed fund involves a team of fund managers who actively choose investments from the stock or bond markets in order to outperform the market. Index funds are known for generally having lower costs, since their portfolios are managed by computers and not professionals. This can mean higher returns with less risk when compared to actively managed funds. The downside is that index funds cannot outperform the market, as they simply track an index. In contrast, an actively managed fund is run by a team of professional money managers who are continually researching and analyzing the markets in order to pick the best stocks or bonds. This gives them the opportunity to outperform the market, although they also come with higher management fees and a higher risk of underperforming the market. Overall, index funds and actively managed funds both have their advantages and disadvantages. It is up to each individual investor to decide which type of fund is best suited to their specific needs and risk tolerance.

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

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