What are active and passive etfs.

**Active ETFs**: These are exchange-traded funds (ETFs) where a fund manager or team actively makes decisions on the underlying investments within the fund. Active ETFs can track a benchmark index but also have the flexibility to change sector allocations, market-time trades, or deviate from the index to meet the fund's objectives. They are managed with the goal of outperforming an index and can provide potential alpha generation from market inefficiencies. Active ETFs offer daily transparency, potential for improved tax efficiency, dual avenues of liquidity, and flexible trading characteristics. However, they tend to come with higher expense ratios compared to passive ETFs.

**Passive ETFs**: These are ETFs that aim to track and achieve the return of a specific index closely. They are designed to replicate the performance of an underlying index and typically have lower expense ratios since they do not require active management to outperform a benchmark. Passive ETFs are popular among investors who prefer a long-term, buy-and-hold approach to investing.

In summary, the key difference between active and passive ETFs lies in the level of investor involvement and the degree of flexibility in the fund's management strategy. Passive ETFs are designed to mirror an index, offering low turnover and costs, while active ETFs involve fund managers making discretionary decisions to outperform the index and potentially generate higher returns.