Active vs. Passive Mutual Funds: Which Offers Better Returns?

Active vs. Passive Mutual Funds

Are you planning to grow your wealth? In recent years, the mutual fund industry has witnessed tremendous growth and helped tons of individuals multiply their money in the long term. In this sphere, investors are often faced with a crucial decision: Active or Passive? This question plays an essential role, especially when you have to invest your hard-earned money.

Today, in this article, we’ll understand how these strategies work and which offers better returns in the game for investors. But first, let’s understand everything about the best mutual funds for sip.

What are mutual funds? What are the advantages of investing in them?

As the term implies, these funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio, which includes stocks, bonds, and other assets. For those who are not aware, these funds are totally managed by professional fund managers, who make the call based on the investment objectives and strategies. 

1.   Professional Management

These budgets are controlled by experienced professionals who make funding choices on behalf of the investors. They conduct extensive and deep studies, examine all ongoing monetary marketplace trends, and actively manage the general portfolio.

(Tip: Always use a SIP Interest Calculator before actually investing!)

2.   Liquidity

It gives extraordinarily easy access to your money. One can fast redeem gadgets each day at the Net Asset Value. So, for instance, if you need a price range right away for a medical emergency or to deposit your child’s tuition fee, you can withdraw your investment at any time.

3.   Diversification

The second reason why humans are more inclined towards this investment is its diversification. By pooling the best mutual funds for sip from a huge range of investors, first-rate acting mutual price ranges can unfold their investments through a broad variety of belongings. This in the long run advantages the investor in the end.

Active and Passive: Everything you need to know

For those who are into investing, they know the crucial decision between opting for active and passive financial management. So, today, let’s understand the key differences between the two.

Firstly, active funds are entirely managed by a fund manager who purchases and sells securities to try to beat the market, potentially leading to higher returns and fees in some cases. However, a point to keep in mind here is that these funds can underperform, and their overall success depends totally on the skills and expertise of the fund manager.

However, on the other hand, passive funds, known as index funds, simply track a market index, holding the same stocks in the same proportions. This ultimately results in lower fees and returns that mirror the performance of the market. Remember that these funds cannot outperform the market, but they tend to offer broad diversification and a smoother ride with less volatility.

Which one to go for?

Opting between the two totally depends on your investment goals and, most importantly, risk tolerance. If you have a long-term plan in your mind and a higher risk tolerance, you could consider a combination of both these funds.

This can easily be done by allocating a core portion of your portfolio to low-cost index funds for stability and a smaller portion to actively managed funds with a strong track record, aiming for some extra growth in the long run. However, always remember the best approach depends on your unique financial situation. 

Also, if you are planning to invest in mutual funds, do trust ‘Bajaj Finserv’, one of the bestmutual funds apps in India.


This debate finally comes down to chasing potential outperformance. Active strategies might outperform, but they also come with higher fees and uncertainty. Passive strategies, on the other hand, deliver market-matched returns with lower costs.