Vine
📊
Investing foundations

Lesson 57 · Written for kid, teen, and little

Index Funds vs Picker Funds

Index funds copy a list of companies; active funds pay someone to choose them.

The idea

Some funds try to copy a whole list of companies — that list is called an index — so they just buy a little of everything on it. Other funds pay a person, called a manager, to choose which companies they think will do best. Choosing takes more research and more people, so those funds usually charge a bigger fee. Neither kind can promise to make money, but the fee is one real difference you can check before you invest. 📊

A

Words to know

6

Index

A set list of companies, like a class roster for part of the stock market.

Index fund

A fund designed to follow an index. Its holdings depend on that index; a broad stock index fund can spread money across many companies.

Actively managed fund

A fund where a manager researches and picks which companies to buy. That research is why the fee is usually higher.

Fee

The money the fund takes each year for running itself. It comes out of your money — 0.85% of $1,000 is $8.50 a year, every year.

Expense ratio

The yearly fee written as a percent, like 0.05% of what you have invested.

Benchmark

The index a fund gets measured against, like a race it has to beat. If the benchmark went up 8% and the fund went up 5%, the fund lost to its benchmark.

Try it — no accountTrue or false

True or false? Swipe each card.

Card 1 of 4

An index fund copies a list of companies instead of guessing which one will win.

Swipe the card — or tap.

In the full lesson

  1. 1True or false
  2. 2Work out the number
  3. 3Make the call

Vine has 107 lessons like this one, each written three ways so a 7-year-old and a 17-year-old both get a version that fits.

Free to use

The practice portfolio is open.

Start practicing

More in Investing foundations