Active funds vs Index funds: Is it time to move from active funds to index funds? Best Index funds in 2021

Many investors often wonder whether they should invest in active or passive mutual funds. Did you know that as of 2020 end, more than 60% of the large-cap active funds underperformed the S&P BSE 100 Index over 1, 3, 5, and 10 year investment period? However, the performance of mid and small-cap funds was better as compared to the S&P BSE 400 MidSmallCap Index. In this article, we present the performance data of active funds in large, mid, and small cap categories as compared to the benchmark to help you investors make the right decision on whether you should invest in active or index funds.

Mutual funds offer an investor two styles of investing: active investing and passive investing. In the active style of investing, the scheme’s fund manager decides which securities to buy, when to buy, and in what quantity. Similarly, the fund manager decides which securities to sell, when to sell, and in what quantity. So, in the active style of investing, the buying and selling decisions are at the fund manager’s discretion. In the passive style of investing, the scheme’s fund manager does not have any say in the buying and selling of securities. Here, a fund manager invests in a basket of securities that are a part of an index. The passive fund replicates or mirrors the index it tracks. The fund manager invests in all the securities of the index as per their weightage. Passive funds ...

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