What is a passive fund?
Passive fund is also called index fund, because it generally chooses a specific index as the tracking object, does not actively seek to achieve performance beyond the market, but tries to copy the performance of the index. Fund managers allocate according to the constituent stocks and compilation methods of the underlying index, so as to minimize the tracking error between the portfolio return and the index return as much as possible.
In recent years, ETF trading open index base, which has developed rapidly, generally adopts passive investment strategy to track the market index of a certain target, so it belongs to index fund.
Correspondingly, active funds, whose investment targets are directly determined by the investment style and concept of fund managers. Based on the research results of the whole investment and research system of fund companies, they actively choose stocks, so there is no fixed investment target.
A simple understanding is that passive funds strive to reduce human operation and follow the index changes, while active funds are operated by fund managers, choosing investment targets and buying and selling.