Index funds have lower operating costs than other types of mutual funds because they are passively managed rather than actively. An actively managed fund is one that has a team making decisions about how to best manage the investments inside the fund. On a daily basis, they are watching the market and may choose to buy or sell specific securities held within the fund in order to maximize the return potential. A passively managed fund simply purchases the same securities that are held by the index it is tracking, but there is no one tracking or trading those securities on a regular basis. Review the differences between the funds using the activity below.