Investing glossary
Active vs indexed management
Indexed management replicates a market index at low cost; active management tries to beat it by picking specific assets, with higher fees and no guarantee of success.
Multiple long-term studies show that most actively managed funds fail to consistently beat their benchmark once fees are deducted, especially in highly efficient markets like large-cap US equities.
This does not mean no active manager ever adds value, but doing so sustainably and predictably in advance is hard, and the extra cost of active management is certain while beating the market is not.