What are active funds?

If you want the chance to beat the market, active funds offer a way to try to do it.

The manager of an active fund researches and picks investments, typically trying to outperform a specific index, like the FTSE 100 or the S&P 500. 

This is different to an index fund, which seeks to closely mirror, or track, the performance of a chosen index. 

Active fund managers might target certain types of companies or make decisions about which countries or regions to invest in. They can also adjust the fund’s investments when market conditions change.

But even skilled managers don’t always make the right choices, and there’s no guarantee that the investments they pick will do better than the market. In fact, they might do worse, so you could end up with a lower return.

That’s why, at Vanguard, we have a dedicated team focused on selecting skilled managers who put investors first and take a long-term perspective.

Active funds usually cost more to run than index funds, so they often have higher fees. At Vanguard we keep our costs low because we know this increases your chances of beating the market. The higher the fees, the better the fund manager needs to perform just to break even. So, by keeping our costs low, we make it easier to give you a better return.

Before you make any investments, whether in active funds, index funds or something else, make sure you understand what the fund invests in and the risks it takes. 

At Vanguard, we offer a range of active and index funds designed for a wide range of investor needs. You can learn more about our funds on our website.