Closet Indexing

Closet Indexing - Closet indexing is an investment strategy, which enables an investment manager or investor to achieve a performance outcome reminiscent of the market index or average, without having to actually purchase the exact same securities that make up the market index or average. To do this, the investment manager or investor must mimic an index, taking into account each given sector or industry, and the weights of the stock contained within each section. This indexing is much more difficult than just passively investing into an indexed fund. It is also subject to the almost the same amount of return, but has more fees, as a typical indexed fund.