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What is Passive Management?

Passive management is an investment approach that aims to match a market index rather than try to beat it.

Detailed Explanation

Passive funds (also called index funds) hold the same securities as the chosen index in roughly the same weights. Lower research and trading costs translate to lower fees. The premise: matching the market reliably at low cost beats most attempts to outperform after fees.

Example

A passive balanced fund might hold dozens of underlying index trackers — NZX 50, MSCI World, NZ government bonds, global aggregate bonds — at fixed strategic weights.

Frequently Asked Questions

Is passive always cheaper than active?

Almost always. The fee gap is the most reliable predictor of long-term net return advantage.

Related Terms

Index Fund (Passive Fund)Active ManagementTracking Error
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