Active & Passive Mutual Funds

We are aware that there are mutual funds and that have enough number of acronyms like NAV (net asset value).

There are a set of funds which are actively managed on a day to day basis where in the fund manager researches, invests and adjusts based on market forces. These are termed as actively managed mutual funds. Most of them your distributor palms on you are these variety.

There are quite another set of funds (pun intended). They dont have active researching by the fund manger and are termed passive funds. Your distributor does not even know about it normally.

A passive funds sets a bench mark and start mimicking the same on a daily basis. For example if SENSEX is defined as a set of 70 company shares, the passive fund too invests in the same set of shares in the same proportion.

The primary difference here is the loads or charges incurred by respective funds differ. Actively managed funds cost more while passives are much cheaper and deliver good results to the investor.

Passive funds are also called ETF or Exchange Traded Funds since they can be purchased in the exchange through a broker.

Ask your distributor about ETF and watch the expression on his face next time!

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4 Responses to Active & Passive Mutual Funds

  1. Srik says:

    You are tagged, Sir.

    Please visit my blog and check out the details.

  2. Srik,
    Oh what am i supposed to do!!! 🙂

    thanks.

  3. Srik says:

    Mohan,
    Yenilla – Tagging andre similar to the game we used to play at school.
    But here, you need to answer to the questions answered by the person tagging you, in your own words 😉

    I have answered two tags at once, and have passed on the first tag to you. i.e. You need to list your three most recuring dreams and pass on to other five people.

    Of course, you are completely free to ignore the Tag too! 🙂

  4. Srik
    Thanks for the education. Will get into right spirits to dream and writ it out.

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