Passive Management


DEFINITION of 'Passive Management'

A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. Passive management is the opposite of active management in which a fund's manager(s) attempt to beat the market with various investing strategies and buying/selling decisions of a portfolio's securities.

Also known as "passive strategy," "passive investing" or " index investing. "

BREAKING DOWN 'Passive Management'

Followers of passive management believe in the efficient market hypothesis. It states that at all times markets incorporate and reflect all information, rendering individual stock picking futile. As a result, the best investing strategy is to invest in index funds , which, historically, have outperformed the majority of actively managed funds.

  1. Index

    A statistical measure of change in an economy or a securities ...
  2. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  3. Inactivity Fee

    1. A sum charged to investors who haven't engaged in any buying ...
  4. Active Management

    The use of a human element, such as a single manager, co-managers ...
  5. Index Fund

    An index fund is a type of mutual fund with a portfolio constructed ...
  6. Efficient Market Hypothesis - EMH

    An investment theory that states it is impossible to "beat the ...
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