How Some Passive Managers Investby Tim Bock
Passive or index managers - the terms are often used interchangeably - make no forecasts of the stock market or the economy, and no effort to distinguish "attractive" from "unattractive" securities. A passive manager investing in large domestic stocks, for example, makes no determination if Ford is preferable to General Motors, Coca-Cola to Pepsi, or Campbell Soup to Kellogg. Instead he or she simply buys every large company from Abbott Labs to Zion's Bank, resulting in a portfolio with hundreds of stocks. Once assembled, turnover is very low since every stock is intended to be held indefinitely.