The main attraction of passive funds is their low cost. They have some other advantages over actively managed funds, including:
- They can provide full exposure to a broad, diverse market.
- They benefit when prices are rising across all sectors, as they tend to do early in bull markets.
- They can have some tax advantages over active funds.
Expense matters. For the low-cost market participation they provide, passive funds play a key role in a balanced investment portfolio.
One shortcoming is that an index does not control for risk.
Contributing: Mike Hoelzl
Learn more:
When Should I …consider actively managed funds?
“Active vs. Passive Management” in Mutual funds, from the Financial Industry Regulatory Authority
Correlation: How investment balance can shift, a Money Talk Video with Kyle Tetting
As our financial lives evolve, we often wonder at what point or how frequently to take certain actions toward our long-term goals. In an ongoing feature, investment advisors from Landaas & Company provide answers.
(initially posted Aug. 30, 2017)