Seeking to replicate the performance of an index by trading a basket of stocks/futures/options is not active management.
For instance, when an institutional investor gives SPDR say, $300,000,000 for a million shares of SPY, the fund goes out at purchases the underlying stocks in proportions that match the composition of the S&P 500, and then issues the SPY shares and holds the underlying and dividend payments in trust. SPDR does not have the option to choose the shares, they purchase a basket that replicates the S&P 500.
This is passive management, there is no one actively picking stocks, and when to buy/sell them.
buttcoinslol|6 years ago
For instance, when an institutional investor gives SPDR say, $300,000,000 for a million shares of SPY, the fund goes out at purchases the underlying stocks in proportions that match the composition of the S&P 500, and then issues the SPY shares and holds the underlying and dividend payments in trust. SPDR does not have the option to choose the shares, they purchase a basket that replicates the S&P 500.
This is passive management, there is no one actively picking stocks, and when to buy/sell them.
PorterDuff|6 years ago