An actively managed mutual fund has a portfolio manager, or team of managers, at the helm to make buy-and-sell decisions on a daily basis. The investment team monitors the existing portfolio for over- or under-performers, looking for ways to either take profit or mitigate loss. Portfolio manager salaries, as well as trade fees, are added to the overall cost of running a mutual fund. Those costs ultimately detract from the overall performance. An index fund, meanwhile, automatically buys or sells investments only when changes are made to an index the fund tracks. Thus, management fees are typically lower, as are the costs associated with buying and selling securities.