Large-cap funds are finding it increasingly difficult to beat the benchmark: Should you go passive?

The passive funds’ AUM is expected to reach 35% of the overall mutual fund industry AUM by March 2025. The industry is innovating, and offerings include equity, ELSS, debt, and smart-beta index funds.

In 2022, Indian investors warmed up to the passive investment category. As per AMFI data, in 2022, the Assets Under Management (AUM) of index funds grew from Rs. 45,429 crores to Rs. 1.29 lakh crores. That is a massive growth of 2.89 times in one year. So, why are Indian investors flocking to passive funds? In this article, we will understand what are passive mutual funds, active vs passive funds, the risks carried by passive funds, and why passive funds are becoming popular among investors. What are passive mutual funds? A passive mutual fund is a scheme that tracks/replicates the performance of a benchmark index. It invests in all the benchmark index constituents in proportion to their weightage in the index. For example, the HDFC Index Fund - Nifty 50 Plan is a...


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