# Active vs Passive Investing

*Saving & Investing — Finicade finance glossary*

Active investing tries to beat a benchmark by selecting securities; passive investing tries to match one as cheaply as possible. The arithmetic is stacked: before costs, active investors collectively hold the market and therefore earn the market return, so after costs they must trail it on average. Long-horizon scorecards bear this out, with 80–90% of active funds lagging their benchmark over 15 years. The debate is really about whether you can identify the exceptions in advance.

**Also known as:** active management, passive investing, active vs passive

**Related terms:** [Index Fund](https://finicade.com/glossary/index-fund), [Expense Ratio](https://finicade.com/glossary/expense-ratio), [Market Efficiency](https://finicade.com/glossary/market-efficiency), [Alpha](https://finicade.com/glossary/alpha), [Benchmark](https://finicade.com/glossary/benchmark)

Source: https://finicade.com/glossary/active-vs-passive-investing