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, and research to decide which investments are best. The opposite of active investing is passive investing (duh), which is just...buying an index fund. Index funds don'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.
Related or Semi-related Video
Finance: What is Closet Indexing?0 Views
Finance a la shmoop what is closet indexing? shirts here shoes there
panties um sorry what's that doing there [Man holding a pair of panties]
underwear...those aren't mine really okay it's not referring to a
literal closet, closet indexing is a financial strategy that professional
investment managers aren't all that proud to be doing hence they keep their
activities in the closet and it's you know like this guy yeah if that's one of [Man appears behind rack of shirts]
them closet index are you.. most investment managers performance is
pegged to a given investment index like the S&P 500 or the Russell 2000 or the
30-year US government paper so if a manager was indexing to the Dow Jones
average well, they'd note the 30 stocks in it like
these...... and their closet [List of Dow 30 stocks]
indexed portfolio would just riff off the stocks in the rough weighting
amounts that comprise the Dow like here's Microsoft but they might have in
their portfolio a tenth of a percent more in Microsoft than is in the Dow
index because they are slightly less bearish about the future prospects of
the once-great company you know then the rest of the street has and they might [People purchasing stocks]
have a bit less oil because well they drive a Tesla and they think everyone
well they just should and by keeping their portfolio very close to their
index well they're never heroes they're never goats, they just keep their jobs
going along collecting their salaries and they live to you know dress another
day... [Girl trying on clothes and man walks by]
Up Next
What are Active Investing and Active Management? Active investing means exactly what it sounds like. The investor is actively buying and selling, a...
What is the Barron’s Confidence Index? The Barron’s Confidence Index compares the yields of the highest graded bonds to intermediate graded bon...
What is a Country Basket (Index Fund)? Investing internationally can be a challenge, as foreign exchange, different accounting rules, time zones an...
The Russell Index is a series of indices that tracks the progress of stocks in a given basket. Aw. We were hoping it tracked adorable Jack Russell...