Question

1) What is definition of the actively managed funds?? And what are the examples of it?? What are the advantage and disadvantage??

2) What is definition of passively managed funds?? And what are the examples of it?? What are the advantage and disadvantage??

Answer 1

1. Actively managed funds are those funds which are continuously adjusting their portfolio in accordance with the change in the market and they are trying to outperform the market by the shuffling the portfolio and changing the Trends so they are into the security valuations and they are trying to outperform the market by finding out various strategies or mix of strategies.

Examples of actively managed Mutual Funds will be growth funds or value funds which are continuously trying to outperform the market

Advantages of actively managed Mutual Funds are related to higher rate of return potential as well as there will be a higher degree of professional management and they will also be always trying to outperform the market.

Disadvantages related to actively manage Mutual Funds are that they are very costly and when we are looking at a previous performance very large number of actively manage mutual funds underperformed the market.

2. Passively managed Mutual Funds are related to managing the mutual funds by replicating the overall rate of the index and they are trying to copy the index rather than beating the market rate.

Example of passively managed visual fund will be Nifty50 reliance fund.

Advantages related to passive management of mutual fund is that they are believing in Efficient market hypothesis and they are always trying to match the return of the market. There are also having a lower fees in comparison to actively managed mutual funds

Disadvantages related to passive management of mutual fund is that they can never outperform the market rate of return and they are also managing lesser amount of Corpus than the actively managed mutual funds. They are also not preferable choices of investors.