Active funds are investment strategies that are directly managed by a manager or team of managers. They individually select securities to beat their intended market index or benchmark.
What is an active fund?
- Active funds are directly managed by a manager, or team of managers, to beat market returns.
- Active managers individually select stocks and bonds after extensive security analysis.
- Active funds usually have higher fees compared with their passive fund counterparts.
Active funds comprise the idea of active investing--actively working to outpace the market’s returns by individually selecting securities like stocks and bonds. Because of the amount of research and time spent in developing an investment strategy, active funds can be more expensive than passive funds. However, given the potential to beat the market, investor returns may outpace the fees and make the investment worthwhile.