Passive investments are the opposite of active ones. But what does that actually mean?
A passive investment fund, commonly known as a Tracker or an Exchange Traded Fund often shortened to ETF, is a product with no active human investment oversight.
This type of product has no fund managers making decisions about what to invest in. It simply operates by systematically buying every asset within the market it is designed to track.
So a FTSE 100 ETF will buy all 100 companies in the UK FTSE 100 stock market.
The key attraction of passive products is their comparatively low costs. But it is important to remember that with no fund manager to provide oversight, the fund cannot discriminate between good and bad investments, it will simply invest in all of them.