Money can be managed inside a mutual fund in a number of different ways; however, all of them will fall into one of two categories: actively managed versus passively managed accounts. In active management, an individual or a team of individuals does the research, makes the investment decisions and selections, and puts investments into the fund. For passively managed accounts, a computer does the buying and selling based on an index.

Recently, passive mutual funds have grown in popularity and the trailing performance of passive or index funds has outperformed active management to a very large extent. This is driving more investors to the world of passively managed investments.

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