Compare index funds vs. actively managed funds

Take advantage of our low costs, no matter what kind of fund you choose.

What's the difference? It depends on how you like to invest.

Index and actively managed funds each have unique benefits that you'll be able to use to your advantage. It all comes down to how you want to put your money to work for you.

 Index fundsActively managed funds
GoalTry to track the performance of a particular market benchmark—or "index"—as closely as possible.Try to outperform their benchmarks and peer group average.
StrategyBuy all (or a representative sample) of the securities in the benchmark.Combine research, market forecasting, and the experience and expertise of a portfolio manager or management team.
Other things to considerIndex funds tend to be more tax-efficient and have lower expense ratios than actively managed funds because they generally trade less frequently.

Learn how index funds could help lower costs, risks & taxes
Though they attempt to beat the market, these funds can also miss their goals, resulting in losses for the fund—and its investors.

Find out if actively managed funds could help you beat the market

What you can always expect from Vanguard


Low costs

We strive to keep your costs low. No matter which of our top-quality funds you choose, you're getting them at some of the lowest costs in the industry. Our mutual funds, on average, cost 82% less than their peer-group averages.*

See the difference low-cost mutual funds can make


Top fund managers

Our fund managers—both our own experts and premier money managers we hire from around the world—make our funds stand apart year after year. Over the past decade, 92% of Vanguard mutual funds beat the average returns of their peer group averages.**

*Vanguard average expense ratio: 0.19%. Industry average expense ratio: 1.08%. Sources: Vanguard and Lipper, a Thomson Reuters Company, as of December 31, 2013.

**For the 10-year period ended December 31, 2013, 10 of 10 Vanguard money market funds, 49 of 51 Vanguard bond funds, 17 of 18 Vanguard balanced funds, and 81 of 91 Vanguard stock funds—for a total of 157 of 170 Vanguard funds—outperformed their Lipper peer-group averages. Only funds with a minimum 10-year history were included in the comparison. Source: Lipper, a Thomson Reuters Company. The competitive performance data shown represent past performance, which is not a guarantee of future results. See the most recent performance of our funds

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

Vanguard provides services to the Vanguard funds and ETFs at cost.

Vanguard is client-owned. As a client-owner, you own the funds that own Vanguard.

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