Imagine your investments are like different buckets where you keep your money to grow over time. In Denmark, there are two main ways people manage these buckets when it comes to investing in the stock market.
One way is called “active management.” It’s like having someone actively pick and choose where to put your money, aiming to beat the market and make more money for you. The other way is called “passive management.” Here, your money is put into a bucket that simply follows the entire market’s performance, without someone actively making decisions about which stocks to buy.
Now, let’s look at the recent trend in Denmark’s investment landscape. The amount of money in passively managed buckets has grown a lot since 2018. It’s gone from having DKK 45 billion (Danish Kroner) in these buckets in January 2018 to DKK 116 billion in May 2023. This is because more people are choosing to put their money in these kinds of buckets that just track the overall market, without someone actively making decisions.
On the other hand, the money in actively managed buckets, where someone actively chooses where to invest, has not changed as much. It’s stayed pretty similar during this time.
What’s interesting is that during this period, there have been 21 new passive investment buckets created, while 6 of the actively managed investment buckets have been closed.
In simple terms, even though more people are choosing to let their investments follow the whole market, the bigger portion of investments is still being actively managed, where someone is making decisions about where to put the money.