According to different investment methods, funds can be divided into active funds and passive funds. Active fund, as its name implies, is to take the initiative to attack. The fund manager can invest whatever he wants with our money, and everything is up to the fund manager. The purpose is, of course, to obtain above-average value-added income. On the contrary, passive fund means that the fund manager does not take the initiative to attack and does not seek to surpass the market performance. Generally, he will choose a specific stock as the investment object and try to obtain high returns by copying the average yield of the whole market.
First, the biggest difference between active funds and passive funds lies in whether it depends on the personal ability of fund managers. Active funds depend entirely on the ability of fund managers, and the personal ability of fund managers directly determines the performance of funds. Whether its income is higher than the market average or lower than the market average depends entirely on the choice of fund managers. Passive funds are basically not affected by the personal ability of fund managers, and obtain average market returns by investing in constituent stocks.
Second, active funds and passive funds bear different risks. Because active funds rely entirely on the personal ability of fund managers to invest, the risks they bear will become greater. Fund managers are not omnipotent, they can't master all fields, and they can't foresee the policy orientation at any time. Then the decisions made will lag behind and the risks will increase. Relatively speaking, the risk of passive type will be much smaller.