Investing in exchange-traded-funds (ETFs) that aim to match the return of a benchmark index can be classified as:
a) All of these.
b) active investing.
c) passive investing.
d) either passive or active, depending on the performance

Answer:

Option c) is correct: Passive investing

If the aim of the Exchange Traded Funds (ETFs) is to match the performance of the benchmark, then it is called passive investing. In passive investing, the fund managers do not actively buy and sell the securities because the aim is just to match the returns of the benchmark index, not beat the index.

Option b) is incorrect because in active investing, the aim of the ETFs is to beat the return of the benchmark. The fund managers actively try to buy and sell securities in the ETFs so as to earn excess return.

Option d) is incorrect because the aim of the ETFs is clearly defined at the beginning and it can only be either passive or active investing and does not change based on the performance.