April 19, 2013 8:57 am
What are these two types of fund -Actively Managed Fund and Passively managed fund?
How they differ from each other and how it impacts investing and returns?
Dear Rajan, in case of passive funds you are getting the returns close to the index tracked by your fund, where as the active fund is trying to improve the performance over index by investing in limited stocks within the index or investing in stocks outside the index. So the returns from Active funds may be higher & lower than your index. if you can digest this risk of deviation, you should invest in active funds else in passive funds.
Although no passive funds was available since the inception of Sensex, still if we assume one was there & an investor invested in the same passive fund, the return till date ‘ll be around 16%. Good or bad?
Can you please let me know how it impacts my investments. i mean is there any benefits in investing in the passive funds?
Dear Rajan, actively managed funds are the ones, where fund manager calls where to invest & how much to invest. HDFC Top 200, Rel. Growth, Quantum Long Term Eq, DSP Eq., Franklin India Blueship, IDFC Prem. Eq………………….& many more, are examples of actively managed funds.
Passively managed funds are those, where the money is invested in the stocks of an index like Nifty or Sensex in the same weightage as the individual stock has in that index & there is no personal call. Here in this case, the fund tries to mimic the returns as generated by the index it’s tracking. Goldman Sachs CNX Nifty Bees, Goldman Sachs Banking Bees, Motilal Oswal MOSt Shares M50 are examples of passively managed funds.
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