Passive funds for active mutual fund investors

The primary goal of an active mutual fund is to beat the index. To achieve that goal, fund managers use their stock-picking skills and subjective judgement while building the portfolio. But the stock market is no pushover. All fund managers don't beat the index. So, in both good and bad times, a fund could lag the index by a big margin! Moreover, different investors have different risk appetites. If you are happy getting the index's return and don't want to depend too much on the fund manager's discretion, then look no further. This is where passive funds can be of great help. Passive funds simply track an underlying index and seek to generate returns as per that. They comprise index funds and exchange-traded funds/fund of funds. For instance, the Nifty 50 Index consists of India's biggest listed companies in terms of market cap

This article was originally published on March 20, 2024.