Active Funds Outperform the Passive Funds

In a developing country like
India, each day new companies are gaining more ground and are emerging into the
power play. When passive funds are dominating the markets of the developed
countries, the fund managers in India believe that the active funds are very
much relevant in the Indian market and have the potential to outperform the
passive funds.

Active funds are typically a type
of fund that is managed by a fund manager and his team. With active management,
such funds endeavour to beat the index with the help of quality stocks. Unlike
passive funds which follow the market index and aren’t managed by a fund
manager, in active funds, the managers endeavour to pick the best stocks in the
market so that the investor can earn greater revenues by outperforming the
standard market index.

Reasons why Active Funds Outperform
Passive Funds

 Unlike Passive Funds which is a lazy investor’s
strategy to earn returns from the market, investors who want to actively manage
their investment in the stock market tend to seek the assistance of
professional fund managers and competent brokers to sell and purchase their
stocks in the market.

Let’s take a look at the points that highlight why
the active fund investors outperform the passive funds:

  • Active funds are actively managed by a
    portfolio manager and co-managers or a well-knit team of managers who make
    active investment decisions for the investor.
  • Thorough research, market prediction, experience and
    skill of the fund manager decides the success of an active fund. The better is
    your choice of fund manager the more are the chances of outperforming the
    market.
  • Appointed fund managers pay thorough attention to
    the changing market patterns, economic factors, political scenario, government
    policies and other potential factors that tend to have an impact on the fate of
    active funds before making any investment-related decision.  Such careful practices tend to enhance the
    scope of earning higher returns than passive funds.
  • The fund managers and his team tend to undertake
    additional market risks to garner steady and higher returns to outperform the
    market. Through their skills and thorough knowledge of the market scenario,
    they make investment decisions that are in favour of active fund investors most
    of the time.
  • Passive funds aren’t managed by professionals and
    lie entirely on the whim and fancies of the investors and the market. Most
    investors aren’t well equipped with the market knowledge and lack the skill to
    manipulate their funds as per the changing market to perform better than active
    funds.

In simpler terms, active funds tend to
outperform a specific market index, while passive funds tend to copy the
investment components of a specific market index. Before trusting a fund
manager with your investments, make sure that they are equipped with the skills
to outperform the market and charge a reasonable fee for the same.

Consult
our team of professional fund managers to avail the best professional help when
it comes to investing in active funds.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 85350

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