Mutual fund managers typically use one of two investment strategies: top-down or bottom-up. The top-down approach begins by looking at macroeconomic data and trends (e.g., inflation, interest rates and economic growth) to determine the regions, as well as the sectors within regions, that are most likely to perform the best over a specific time period.


There are two main approaches to investment fund construction: active and passive. Let’s look at the essential features of each.


An exchange-traded fund (ETF) is, as its name suggests, a fund that’s traded on a stock exchange. ETFs are generally designed to track a particular index or combination of indices. For example, …