In the classification of funds, we often see so-and-so index ETF funds and so-and-so index strengthening funds. Compared with conventional equity funds or hybrid funds, it looks more complicated. In fact, index funds are usually called passive funds, while conventional stock funds are active funds. Which is better, passive fund or active fund?

1, operation mode

This is the main difference between passive funds and active funds. Passive fund refers to simulating an index, holding a basket of stocks and trading back and forth with the fluctuation of the index. Active fund refers to the trading fund in which the fund manager and management team independently decide the trading behavior of individual stocks through the comprehensive prediction of the market and the study of individual stocks.

Therefore, passive funds trade with the index, and active funds trade independently.

2. Sources of profit

The profit of passive funds mainly comes from the expected return of tracking index, while the profit of active funds mainly comes from the fund manager and management team's grasp of the market and the trading level of individual stocks.

3. Risk

Passive funds have small fluctuations and relatively small risks, while active fund transactions are subjective and risky.

4. Transaction costs

Passive funds are simple to manage, and the subscription fee, management fee and redemption fee are relatively low, while active funds have high management requirements, and the subscription fee, management fee and redemption fee are relatively high, which can usually reach twice that of passive funds.