These investments are set up to generate returns that are in line with that of an index made up of, for example, all the shares on a stock market, or the shares on top stock markets globally.
You can therefore get a broadly diversified investment from which you expect to earn the return that the market delivers for the cost of only a small fee.You may see or hear references to alpha and beta when passive and active investments are written or spoken about. There are some managers that specialise only in index-tracking investments, while other larger financial services groups have specialist divisions or companies within their larger group offering index-tracking investments.
An index-tracking investment will always be slightly out relative to the index it tracks because of the investment fees. Cash held to pay out investors may also affect a fund's tracking error.
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Source: Fin24 - 🏆 21. / 63 Read more »