Which mutual fund is best for investment - Active or Passive - YP Buzz Finance

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                 These days Passive Mutual funds are in the news.  Platforms like Zerodha and Angel One are planning to enter the asset management business by focusing on idle investment products. From an investor's point of view, it is important to understand the difference between co-financing and idle financing and what could be best for them.

Active vs Passive

According to Harshad Chetanwala, Co-Founder, MyWealthGrowth.com, idle funds have improved the money managed actively over the past few years. As a result, these investments continue to see a growing interest rate for investors.

“In the program of a cash flow, there is a chance that there will be higher returns compared to the benchmark, but there is also a possibility of lower returns, if there are problems in selecting shares by the fund manager. While there is a lack of revenue, investors are confident of making market-related returns.

Which is better for investment

There are many companies where the scope of improving efficiency and efficiency in various fields continues to exist. You can invest in such businesses with active capital.

However, Chetanwala said, “A mixture of active and passive funds could work well in the long run. Investors who start out investing in joint ventures can be allocated more money and investors with medium and high risk can look at a 15-20% allocation of these funds and some may be in active funds. ”

Garg said Indian markets are not performing well which gives investors financial opportunities for investment and high profitability, leading to a higher preference for hard-earned investments compared to idle capital.

"But in developed markets like the US, the markets are very efficient and as a result, the interest in artificial investments is increasing," he added.

Garg said the problem in Indian markets is that there are very few financial options to be made. Most of the money is linked to two key indicators - NIFTY 50 and Sensex. "Most of the land needs to be closed before the proceeds can become very popular in Indian markets," he said. This probably also explains why firms like Zerodha are planning to enter the idle financial business.

According to Chetanwala again, as the stock market and investors become more mature we will see more options in terms of idle control.

Active vs Passive mutual funds

In mutual funds which are active, fund managers are diligent in managing funds. These managers must make practical decisions to buy or sell a particular stock based on market conditions and basic stock characteristics. The purpose of an effective MF fund manager is to make more profit than the index index returns.

For example, a fund manager of a large cooperative fund (which follows the NIFTY50 index as a measurement index) may try to generate higher returns than the returns generated by the NIFTY50 index.

The Fund Manager is supported by analysts and a team of researchers to conduct research and track the performance of investment companies. As the people who participate in this process are well paid, it adds to the cost of managing the fund which results in relatively high cost estimates of actively managed funds. The fund manager should therefore make a higher interest rate to allow for a higher fund cost ratio, Garg said.

However, in synthetic funds, fund managers do not actively sell stocks, and those funds are known as the index Fund. Investments are made in stocks that cover the index and at the same rate as the index. The purpose is to generate a return similar to the index.

The cost of managing the transaction funds is usually lower than the operating costs because a special team is not required to track the market. Such funds generate market-related returns.

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 YP Buzz

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