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Finance Glossary

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Over 700 finance terms, Shmooped to perfection.

Active Investing


Active investing means that someone (hopefully someone who knows what they're doing) is in charge of managing the money and investments in a fund.

When you buy shares in a mutual fund, for example, you're paying a fee because someone has hired theoretically smart analysts and portfolio managers who spend all day looking at stocks and bonds to make investments on your behalf. The idea is that these managers and analysts are... active. They are using their own experience, forecasts, research, and other stuff (hopefully not psychics) to decide which investments are best.

The opposite of active investing is passive investing (duh), which is just... buying an index fund. Index funds doesn't have portfolio managers; what they do have are rebalancers. Might sound like Marvel villains, but they're really just finance folks who check every so often (usually quarterly) to make sure that the index still reflects what you think you bought in the first place.