How are active mutual funds different from passive mutual funds
When it comes to investing there are two types of funds- active and
These funds are handled by professional managers, who play an active role in choosing and changing the securities in the portfolio.
These funds don’t require any active involvement of fund managers as they follow a given market index and mirror its movements.
The strategy of active funds is to outperform the market whereas that of passive funds is to achieve index return
The expense ratio and management fees are high in active funds and low in passive funds.
The risk in active funds is high depending on fund manager’s expertise whereas in passive funds, the risk is low as involvement of fund managers is not there.
In active funds, fund managers are responsive to market changes and alter the portfolio accordingly. In passive funds, not too responsive as only specific index holding can be altered.
Equity, debt, hybrid, fund of funds, and gold funds are types of active funds. ETFs and Index funds are type of passive funds
