![]() That said, it is also important to consult a certified and registered investment advisor to choose a fund based on your financial goals and risk appetite. However, a passive fund may be a better option if you are more cautious about your investment returns and the costs involved. An active fund may be a suitable choice for you if you are willing to take on a little bit more risk and want to try to outperform the market. The ideal fund in which you can invest depends on your unique investing objective and risk appetite. But in the medium term, specifically 1 to 3 years, active funds tend to show higher returns compared to passive funds.īefore investing, it is important to keep in mind that active funds often have higher cost ratios. However, studies have shown that in the long run, passive funds may provide similar returns to active funds. The choice between active and passive funds has always been a topic of great confusion among retail investors. Investors who want to track the market without trying to beat it Investors who want to try to beat the market ![]() The passive, or index fund, thus generates market returns in accordance with the index. In passive funds, there is no direct involvement of the fund manager in decision-making as to how much to invest or when to invest in stocks represented in an index. ![]() The higher the index return, the higher the return from the passive fund tracking it. In this approach, the fund invests money in the companies represented in an index such Nifty50 in the same proportion as the company’s representation in the index. Passive funds, also known as index funds, do not involve the active participation of a fund manager. However, as fund managers are involved in decision-making, active mutual funds have higher costs attached to them in the form of higher expense ratios.Īlso Read: Direct Plan vs Regular Plan: The difference you should know before starting SIP in Mutual Funds Passive Funds Mutual Fund calculator: These schemes turn Rs 10,000 SIP into Rs 3 crore to Rs 5 crore in 20 years
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