Index Funds vs Picker Funds
Index funds copy a list of companies; active funds pay someone to choose them.
The idea
Some funds try to copy a whole list of companies — that list is called an index — so they just buy a little of everything on it. Other funds pay a person, called a manager, to choose which companies they think will do best. Choosing takes more research and more people, so those funds usually charge a bigger fee. Neither kind can promise to make money, but the fee is one real difference you can check before you invest. 📊
Words to know
- Index
- A set list of companies, like a class roster for part of the stock market.
- Index fund
- A fund that just copies an index instead of trying to guess winners.
- Actively managed fund
- A fund where a manager researches and picks which companies to buy.
- Fee
- The money the fund takes each year for running itself. It comes out of your money.
- Expense ratio
- The yearly fee written as a percent, like 0.05% of what you have invested.
Try it — no account needed
True or false? Swipe each card.
An index fund copies a list of companies instead of guessing which one will win.
In the full lesson
- 1True or false
- 2Work out the number
- 3Make the call
Vine has 107 lessons like this one, each written three ways so a 7-year-old and a 17-year-old both get a version that fits.
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