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1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problemsChoose by comparing the fund’s objective, benchmark, total costs, net performance, tracking behavior, and risk—not by the “FTSE” or “active” label alone. An index-tracking fund aims to follow a rule-defined benchmark; an actively managed fund gives its manager discretion to select investments in pursuit of an objective. Neither approach is automatically better for every investor.
What is the difference between an index fund and an active fund?
An index is a benchmark, not an investment product. FTSE Russell describes an index as a hypothetical portfolio intended to represent a market or segment; a fund issuer can license that index and create an ETF, mutual fund, or other product designed to track it. As FTSE Russell puts it, “An index is a hypothetical basket of stocks, so it cannot be invested in directly.”
An index-tracking fund follows rules set by the index provider, while an active fund’s manager makes discretionary investment decisions to pursue the fund’s stated objective, such as outperforming a benchmark. “Passive” describes the fund’s management approach, not an absence of decisions: the index provider establishes rules, and the fund may use sampling instead of holding every index constituent.
Keep the roles distinct: FTSE Russell defines and calculates an index; the issuer manages the fund, its holdings, charges, and implementation. A fund bearing a FTSE Russell benchmark name is not the index itself, and its results need not match the benchmark exactly. FTSE Russell Education Centre and its index-linked products information explain these distinctions.
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How do you compare the benchmarks and portfolios?
“FTSE” alone does not tell you what a fund owns. Indexes can cover different geographies, market sizes, investment styles, and securities, and their rules determine which investments qualify and how they are weighted. Two index funds can therefore have substantially different exposures.
Before comparing returns, check the fund’s stated objective and named benchmark, then inspect the benchmark’s coverage and methodology. Consider eligibility rules, concentration, and how often constituents or weights change. FTSE Russell identifies representativeness, transparent and objective rules, investability, and cost efficiency as relevant index-design considerations; index changes can also create trading costs for funds that follow them. Its index resources provide a starting point for finding methodology information.
For example, the schedule for one index family should not be assumed to apply to another: FTSE Russell’s Russell U.S. index page says reconstitution moves from annual to semiannual in 2026. Check the current methodology and announcements for the specific benchmark you are considering at Russell U.S. Indexes.
Are index funds cheaper than actively managed funds?
They can be, but the management label does not establish the total cost of a particular investment. Index tracking may require less research and security selection, but compare the actual share class and all applicable charges rather than assuming every index fund is cheaper than every active fund.
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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →- Expense ratio: The fund’s ongoing operating expenses, expressed as a percentage of assets.
- Loads and transaction fees: Sales charges or purchase and redemption fees where applicable.
- Trading costs: Costs associated with buying and selling investments, including trades caused by portfolio or index changes.
Charges vary by fund, share class, account, and jurisdiction. The U.S. Securities and Exchange Commission’s guide to how fees and expenses affect a portfolio explains why fees matter and which charges investors may encounter.
Can an index fund underperform its index?
Yes. A fund’s net return can fall short of its benchmark because of fees and expenses, trading costs, and tracking error. Sampling can also contribute to differences when a fund holds a representative subset rather than every index constituent. The SEC’s Investor.gov states: “An index fund may underperform its index because of fees and expenses, trading costs, and tracking error.” See its Index Funds overview.
When assessing a tracker, distinguish the index’s return from the fund’s own results after costs. Look at tracking difference—the gap between fund and benchmark returns over a period—and the fund’s net performance. Tracking error describes variation in that gap over time; it is not the same as the fund’s total investment risk. Past closeness to an index does not ensure future results.
What does active-fund performance evidence show?
In its SPIVA U.S. Year-End 2025 scorecard, S&P Dow Jones Indices reported that 79% of active large-cap U.S. equity mutual funds underperformed the S&P 500 over the one-year period ending in 2025. That is a specific historical comparison for U.S. large-cap mutual funds against the S&P 500—not a result for all active funds, markets, categories, or time periods. The full scorecard is available from S&P Dow Jones Indices.
This statistic is context, not a forecast or proof that a particular index fund will outperform. Use performance evidence relevant to the fund’s category and benchmark, compare net returns across multiple periods, and account for tracking and costs. A single strong or weak period is not enough to settle a long-term choice.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How should you choose between a FTSE tracker and an active fund?
Use this checklist to compare specific candidates on the same basis:
- Define the exposure you want. Identify the market, geography, company size, style, and asset type that fit your objective.
- Read each fund’s objective and benchmark. Confirm that the benchmark is an appropriate comparison for the exposure you want, rather than relying on the fund name.
- Inspect implementation. For a tracker, check whether it fully replicates or samples its index and review its tracking difference and net returns.
- Compare total costs. Check the expense ratio, applicable loads or transaction fees, and trading costs for the actual share class and account.
- Assess portfolio risk and fit. Consider diversification, concentration, volatility, liquidity, and whether you can tolerate potential losses.
- Apply your circumstances. Goals, time horizon, tax situation, account type, country, and available products can affect suitability.
Rules, taxes, investor protections, fund structures, share classes, fees, and product availability differ by jurisdiction. The 2025 SPIVA statistic above is U.S.-specific, and the SEC links describe U.S. investor information. No particular fund can be identified as suitable without knowing an investor’s circumstances and reviewing current fund documentation.
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