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Indexed ETFs and actively managed ETFs are two distinct approaches to fund management. Understanding the difference between them can help investors make more informed decisions.

‍Indexed ETFs

‍Indexed ETFs, also known as index-tracking ETFs, are designed to mirror the performance of a specific market index, such as the S&P 500 or the Dow Jones Industrial Average. These ETFs:

• Replicate the holdings of the chosen index.
• Aim for consistent returns aligned with the index.
• Generally have lower fees due to minimal active management.

‍Actively Managed ETFs

‍Actively managed ETFs, on the other hand, take a more hands-on approach. These funds:

• Employ a fund manager who selects investments based on a specific strategy.
• Seek to outperform the market rather than just match it.
• Typically involve higher fees due to the active management and research involved.

‍Key Differences

‍Objective:  

1. Indexed ETFs: Match the performance of a specified index.  
2. Actively Managed ETFs: Aim to beat the market through strategic selection of holdings.  

‍Management Style:  

1. Indexed ETFs: Passive management with minimal alterations.  
2. Actively Managed ETFs: Active management involving frequent adjustments to the ETF’s holdings.  

‍Cost:

1. Indexed ETFs: Generally lower due to less management.  
2. Actively Managed ETFs: Higher due to more intensive management efforts.

Choosing between an indexed ETF and an actively managed ETF depends on your investment goals, risk tolerance, and preferred management style.