According to a recent study during the July-September quarter (Q2) active equity funds witnessed net inflows of about Rs 74,000 crore with fund managers and on the other hand, passive equity funds saw Rs 9,000 crore of inflows.
About Equity funds
- An equity fund is a mutual fund that invests principally in stocks.
- It can be actively or passively (index fund) managed. Equity funds are also known as stock funds.
- Stock mutual funds are principally categorized according to company size, the investment style of the holdings in the portfolio and geography.
What are Active equity funds?
- In this fund the fund manager is ‘Active’ in deciding whether to buy, hold, or sell the underlying securities and in stock selection.
- This fund relies on professional fund managers who manage investments.
- Active funds adopt different strategies and styles to create and manage the portfolio.
- They are expected to generate better returns (alpha) than the benchmark index.
- The risk and return in the fund will depend upon the strategy adopted.
What are Passive equity funds?
- These funds hold a portfolio that replicates a stated index or benchmark.
- In a passive fund, the fund manager has a passive role in the stock selection.
- Buy, hold or sell decisions are driven by the benchmark index and the fund manager/dealer merely needs to replicate the same with minimal tracking error.
Q1) What are Mutual funds?
Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. They're managed by professional fund managers or management teams who make investment decisions based on the fund's objectives.