passive investing

A fund that seeks to mimic the returns of an index; as opposed to active investing, where the fund’s managers try to outperform indexes and peers. Passive investing (also called index investing) eliminates the need for a fund to hire a team of analysts to assess the operations of individual companies. Index fund managers seek to match their portfolios to the construction of an index. Trading and, thereby, tax costs are frequently lower for index funds. Turnover is limited to the frequency at which the index is rebalanced or adjusted. While indexing primarily remains within the realm of exchange-traded funds (ETFs), investors can find both mutual funds and ETFs that track most of the better-known indexes.