Active investment funds are where the fund manager will attempt to beat the collective market where he or she operates, whereas passive funds (also known as index trackers) track the overall returns for that market.
To keep things simple, think of the stock market in two groups. Active funds on one side and passive funds on the other. If we forget about costs for
a minute, the average active fund return will be the same as the average passive fund return.
This is because all active funds are the market. Passive funds track the overall result of this market.
Now if we add costs back in, because active funds usually cost considerably more than passive funds, the average active fund will return less after charges. Simple.
For your own personal Financial Director to run your family finances call:
Carl Roberts FPFS, Chartered Financial Plannercarl@rtsfinancialplanning.co.uk
rtsfinancialplanning.co.uk // 01908 592544 // 07702 965275
RTS Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registration number 10619163. 21 Fosters Lane, Bradwell, Milton Keynes, MK13 9HZ
Risk warning: Stock market linked investments and any income from them, can fall as well as rise and are not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.