Active management and passive management represent two contrasting investment strategies. Active management involves portfolio managers or analysts actively making investment decisions, aiming to outperform a benchmark index, such as the S&P 500. This approach relies on research, market analysis, and timing to select stocks or assets they believe will deliver above-average returns. Active management aims to leverage skill, insight, and information to achieve alpha, or returns above the market average. However, this approach typically comes with higher fees, given the intensive research and frequent trading involved.

In contrast, passive management seeks to mirror the performance of a specific index rather than trying to beat it. Passive investors usually invest in index funds or exchange-traded funds (ETFs) that automatically track the holdings of a benchmark. This approach is less labor-intensive, resulting in lower management fees and transaction costs. Since passive management is designed to match the market's performance, it typically involves less risk than active strategies, especially over long time horizons.

While active management aims for high returns through market insight, passive management focuses on cost efficiency and long-term growth by simply tracking the market. Both strategies have their benefits, depending on an investor's goals, risk tolerance, and investment horizon.