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Active Vs Passive Funds: Mutual funds have become increasingly popular as a means of investment in recent years. People are choosing the path of mutual funds in the desire of better returns. However, there are many types of confusions in front of people in this too. People do not understand which type of mutual fund they should invest in.
Types of Mutual Funds
First of all, let us tell you that there are mainly two types of mutual funds. First Active Mutual Fund and second Passive Mutual Fund. Passive funds have rapidly emerged as the preferred asset class during the Corona pandemic. According to the latest AMFI data (AMFI Data), the ETF market saw a good growth in January 2023. ETF’s market share was 11.2 per cent in January 2022, which increased to 13.1 per cent in January 2023.
increase recorded as
By December 2022, the number of Mutual Fund Accounts was 14 crore 11 lakh 19 thousand 590, in which equity based accounts accounted for 67.5 percent, Exchange Traded Fund (ETF) and Fund of Funds (FoF) accounted for 12.5 percent and hybrid The share of the scheme was 8.5 per cent. In terms of number of accounts, ETFs and FoFs have become the second largest category in December 2022, overtaking hybrid and debt-based funds. The number of ETFs and index funds has increased to 305 by January 31, 2023, from 196 on January 31, 2022. In this context, a rapid growth of 56 per cent has been recorded in just one year.
what is the difference between the two
Now let us tell you what is the difference between both the types of funds. If you do not know about investing or have very little knowledge, then it is right to invest in mutual funds through passive funds such as ETFs and index funds. Passive funds are for such investors who want to take less risk. Also, it saves you from the hassle of choosing which fund to invest in.
What are Active and Passive Mutual Funds?
Passive mutual funds track the market. Due to this, it has less volatility as compared to active funds. It is good for new investors or those investors who prefer safety rather than returns. Index funds and ETFs are passive funds that track their underlying benchmark. Both these funds invest in companies that are included in the benchmark index.
understand from this example
For example, Nifty50 Index Fund or ETF invests in 50 companies of Nifty50. Similarly, Sensex Index Fund or ETF invests in 30 Sensex companies. ETF and index funds are available for many categories including Gold, Commodities, Bank, Healthcare. Whereas, equity mutual funds, debt mutual funds, hybrid funds or fund of funds etc. come under the ambit of actively managed funds.
When it comes to active mutual funds, here the fund managers of these actively managed mutual funds do a lot of study and analysis to formulate the fund’s strategy. Not only this, they also regularly take decisions related to buying and selling. Here the fund managers actively manage the active mutual funds. Apart from this, investors do not need to do much research or analysis, as this work is done by the fund manager.
Disclaimer: (The information provided here is for information only. It is important to mention here that investing in the market is subject to market risks. Always take expert advice before investing money as an investor. ABPLive.com It is never advised to invest money here.)
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