Active Funds vs Passive Funds: Examples, advantages, and differences

Mutual fund schemes differ in various aspects, and one such point of differentiation is determined by the style in which they are managed. Are they actively managed funds or passive funds? Actively managed funds have a fund manager at the helm, while passive funds typically mimic a benchmark index. There is no right or wrong answer here because both active and passive funds have their share of pros and cons. But it helps to understand the basic characteristics of each type of fund, the advantages of each and the differences between the two.

So besides the core definition, what are the other essential differences between these two types of funds? And how do you decide the fund that is likely to work for you? Read on to find out.

Disclaimer:

Helpful information for investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under ‘Intermediaries/ Market Infrastructure Institutions’. For redressal of your complaints, you may please visit www.scores.gov.in . For more info on KYC, change in various details & redressal of complaints, visit mf.nipponindiaim.com/investoreducation/what-to-know-when-investing This is an investor education and awareness initiative by Nippon India Mutual Fund.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.

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