Another main difference between active and passive fund management is the fees charged. As they require less day-to-day management, passive funds usually have lower ongoing charges. With actively managed funds, the extra work and analysis involved means investors generally have to pay more in the way of charges, although having your money with a good fund manager can justify this extra cost.
Many funds, both active and passive, give investors the choice between investing in either income or accumulation units. The difference is how the income generated by the investments in the fund is treated.
For example, if a fund is invested in shares, these shares will often pay dividends and thus generate an income. The income version of a fund will distribute these dividends to investors as cash. With the accumulation version, the fund manager instead uses the cash to buy more shares, increasing the value of each unit in the fund.
Those investing with the aim of generating an income should choose income units. Those looking for long-term growth in their investment will probably wish to choose accumulation units.
Investment trusts are a different type of fund. They are traded on the stock market (rather than directly through the fund manager). As such, unlike funds which typically value once a day, they have a share price which moves up and down in value when the stock market is open.
While there are many good quality investment trusts available, investment trusts often involve more sophisticated techniques than regular funds, such as the manager borrowing money to try and boost returns. This can make them a higher risk investment.