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Mutual Funds are financial instruments that allow investors to invest in the equity or debt markets without prior knowledge or experience. These funds pool capital from several investors and then invest in equity or debt markets depending upon the focus area.
Mutual Fund.
Despite volatility and correction in the market in the past few months, the lure for SIP hasn’t waned among investors. It’s still strong, as seen in the SIP inflow data for January 2025.
According to AMFI, the SIP inflow in Mutual Funds continued to grow at a good pace in January 2025 to Rs 26,400 crore as compared to Rs 18,388 crore in the corresponding month of FY2023-24, reflecting a jump of 40 per cent Year-on-Year.
Mutual Funds are financial instruments that allow investors to invest in the equity or debt markets without prior knowledge or experience. These funds pool capital from several investors and then invest in equity or debt markets depending upon the focus area. They then return the profit to their investors after taking out their cuts. Investors may face negative returns on their investments due to the volatility in the markets.
There are two types of mutual funds – active and passive.
Let’s know the difference between Active Mutual Fund and Passive Mutual Fund:
Mutual Funds are categorized into active and passive funds based on their management style.
| Feature | Active Mutual Funds | Passive Mutual Funds |
| Management | Actively managed by fund managers who make investment decisions. | Follows a specific index (e.g., Nifty 50, S&P 500) without active management. |
| Objective | Outperform the market (benchmark index). | Replicate market performance. |
| Cost (Expense Ratio) | Higher (1-2%) due to research and active trading. | Lower (0.1-0.5%) since there’s minimal management. |
| Returns | Can be higher if the fund manager picks the right stocks. | Typically mirrors market performance. |
| Risk | Higher due to stock selection and market fluctuations. | Lower since it tracks the market with diversification. |
| Decision Making | Relies on fund manager’s expertise and strategy. | No active decision-making, just follows the index. |
Passive has lower expense ratio that helps to save cost over time. It is well-diversified and no dependence on fund manager skill.
Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.