Funds can be classified by how they are managed. Actively managed funds are where the fund manager buys and sells investments regularly in an effort to outperform a specific market index, such as the ASX200.

Passive investment funds, also known as index funds, simply buy a portfolio of assets that mimic an index, such as the all ordinaries index or the S&P200 index. Index funds generate a return, before fees, that is almost the same as the index it is tracking.