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Jamie Letcher
VP, Wealth Management
Summit Financial Advisors
Located at Summit Credit Union
401 S. Yellowstone Drive
Madison, WI 53719
Phone: 608-271-1012
Email: james.letcher@lpl.com
November/December 2023
Active vs. Passive
While many people know the differences between stock, bond and money market mutual funds*, they may not be as familiar with mutual fund styles, such as active versus passive. These styles may have a role in your investing strategy as you maneuver through up and down markets and how far you are from reaching your financial goals.
While your financial professional can help you determine the right asset mix for your situation, it still pays to understand how different styles of mutual funds are designed to take advantage of various market environments.
Some mutual funds blend passive and active management, but most are either one or the other. An example of a passive manager would be an index fund manager. These funds generally try to mimic the holdings of a particular index**, so they don’t buy and sell funds as often as an active manager does.
Some index fund managers try to outperform a given index by focusing on a particular part of the index, such as overweighting a country in an international index or underweighting a sector.
An active manager, on the other hand, buys and sells investments, believing the fund can beat a given benchmark. Because this type of fund trades more often, it generally has higher charges and fees than a passively traded fund.
"THE STANDARD & POOR'S 500 INDEX IS COMMONLY MIMICKED BY PASSIVE INVESTMENT MANAGERS. THE S&P 500 REPRESENTS THE LARGEST COMPANIES BY MARKET CAP TRADED IN THE U.S. STOCK MARKET"
*Investors should carefully consider the investment objectives, risks, charges, and expenses of the fund before investing. Read the prospectus carefully before investing or sending money. Because mutual fund values fluctuate, redeemed shares may be worth more or less than their original value. Past performance won’t guarantee future results. An investment in mutual funds may result in the loss of principal.
** You cannot invest directly in an index.
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