Passive management (also called
passive investing) is an investing strategy that tracks a market-weighted index or portfolio. The idea is to minimize investing fees and to avoid the adverse consequences of failing to correctly anticipate the future. The most popular method is to mimic the performance of an externally specified
index. investors typically do this by buying one or more
index funds. By tracking an index, an investment portfolio typically gets good diversification, low turnover (good for keeping down internal
transaction costs), and low management fees. With low fees, an investor in such a fund would have higher returns than a similar fund with similar investments but higher management fees and/or turnover/transaction costs.