Investing · General financial education

Active and passive

Passive means: stay as close as possible to a rule. Active means: someone deliberately differs in search of a different result. The reliable difference is often cost, not a promised extra return.

In more detail

Active management can do better or worse than its comparison index after costs. Active funds can lag their benchmark after costs. That is not an eternal percentage. You would need to look up a dated supervisory or market statistic; Finmon does not treat a figure as a law of nature.

Background

If a historical comparison includes only surviving funds and omits liquidated or merged funds, that can bias the results (survivorship bias). A fund can call itself “active” and still stay close to the index. BaFin notes for ETFs that the management form alone does not tell you how it will perform. What you can compare are ongoing costs, the objective and actual deviation, without crowning a winner.

An example

Two funds follow similar shares. One charges 1.5% ongoing costs and differs from the index. The other charges 0.2% and stays close to the rule. The cost gap is readable. Who “wins” is not settled.

A common misconception

Active or passive decides who delivers the higher return.

The form alone does not forecast performance. What you can often compare are costs and mandate.

Source: BaFin · ETFs. Last reviewed: 2026-11-09. Editorially reviewed on 2026-11-09. Next review 2027-11-09. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.