Closet trackers: have you bought a duff fund?

Passive investing makes a lot of sense, says Matthew Partridge. But you want to be sure you're not paying over the odds for a closet tracker.

Tired businessman with adhesive note on his eyes. Concept of sleeping.

Your manager may be more passive than he looks
(Image credit: vadimguzhva)

When you invest in the stockmarket via a fund, you can opt for a "passive" or an "active" approach. Passive funds simply aim to track a stockmarket index. As a result, they are low cost. Active funds aim to beat the market, and employ expensive managers to do so. These managers promise to hunt down neglected areas of the market or follow a strategy that will lead to market-beating returns. They may not deliver, but some investors are willing to pay more in the hope that they will.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri