Magic of Passive Funds | This is better than normal mutual fund

 

Economies around the world have been affected by the coronavirus epidemic. In this difficult period, financial experts say that in the Corona era, invest in such options, where the money is safe and good returns are given. In such times of crisis, instead of placing bets on select companies, it may be better for investors to follow indices like SENSEX or NIFTY. This is because they have a slightly lower risk of volatility compared to individual companies. Its passive fund will help you. Investing in passive funds is a better strategy.

 

It is known that indices are prepared from statistical methods keeping in mind the different sectors and proper representation of the companies performing well. They are also reviewed regularly. This is the reason why a benchmarked investment is profitable to make money in the long term. However, indices are not instruments for buying or selling.

 

Fund managers manage general mutual funds, while passive funds act as benchmark indices. General funds may give better or worse returns. But passive funds have returned like benchmark index. The charge on investment in general mutual funds is 2.25 to 2.50 per cent, while in passive funds, 0.50 to 0.75 per cent.

 

Investors can resort to passive funds, which are a type of mutual fund. Keep in mind that the fund manager does not decide for himself how much to invest in a passive fund. Rather it tracks an index such as the Bombay Stock Exchange (BSE) leading index Sensex or the National Stock Exchange (NSE) index Nifty-50.

 

The amount of investment is invested in the shares of those companies in proportion to the number of shares in the index. An example of a passive fund is also an ETF or index fund. The risk of choosing the wrong investment in times of crisis increases. Not only new investors but also fund managers can make mistakes. But the risk can be reduced by investing in passive funds.

 

One advantage of investing in passive funds is simplicity. This makes it easier for investors to track the performance of their investments. Under this, investors get a clear view of profits and losses.