Active Funds vs Passive Funds

How to decide which type of mutual fund scheme out of the two will be more suitable to your investor profile than the other. See more to know.

The active decisions we make in life to proceed in a certain direction help us reach different goals in life. On the other hand, we can also choose to let it all go with the flow and live our lives the way it happens. Depending on your preferences and needs, you can choose the way that seems most suitable to you. The best part is that each of these ways to live life has its perks. The same holds true in the mutual fund ecosystem in the form of active and passive funds.

Active funds have a dedicated fund manager who looks after all the selling and buying decisions while carefully looking at the market dynamics. On the other hand, passive funds tend to mimic a benchmark index to deliver returns that closely resemble the benchmark outcome. While researching different types of passive funds, you might have also heard of passive index funds, Fund of Funds (FoF), and Exchange Traded Funds.

But should you invest in active funds or passive funds? How to decide which type of mutual fund scheme out of the two will be more suitable to your investor profile than the other? Indeed, each has its unique pros and cons, which makes them ideal to different classes of investors - conservative, mildly aggressive, or fully aggressive.

To better understand which way to go, it’s time for you to know the finer differences between the two.

-          economictimes