Skip to main content

Equity ETFs or Diversified Equity Funds, which one will you choose?

The importance of being active couldn't have been explained better. To put it simply, one needs to be active in his or her daily life, if one desires to succeed. An active mind always helps in making sound decisions which otherwise (if you are not active) could lead to chaotic situations (one does not make the right decision).

 

On the other hand if you remain passive (i.e. not active) in whatever you do, you will surely see yourself at the losing end.

 

Now, that you are aware of how important it is to be active, make sure that your investments are active in generating long term growth in order to make you wealthy as well as healthy.

 

While investing in mutual funds too, you investors need to be careful while selecting the right mutual funds according to your ability to bear risks. You need to keep in mind that while there are mutual fund schemes which are actively managed in order to outperform their respective benchmarks and provide a phillip to your returns, there are some passively managed funds too, with an aim to mimic or imitate their benchmarks in terms of returns and composition.

 

Let us probe further into this.

 

Actively managed mutual funds

 

Actively managed mutual funds or diversified equity schemes as we call them are always on a constant look out for opportunities across various market segments in order to generate superior returns with sole intention to beat their selected benchmark indices. The fund managers actively participate in managing these funds in order to provide superior returns; while at the same time intend to minimize the associated risks.

 

Advantages:

 

·                  Superior returns

·                  Diversification across various sectors and market capitalizations

·                  Flexibility and liberty to change investment style and strategy to minimize risk or boost funds performance

 

Disadvantages:

 

·                  Medium to high to very high risk profile

·                  High transaction cost and expenses

 

Passively managed funds

 

On the other hand passively managed funds or Index Funds or Index Exchange Traded Funds (ETFs) imitate their respective benchmarks in terms of composition and returns. Their sole objective is to mirror the performance of their respective benchmark indices. Over here the fund managers are not as active as they are in managing diversified equity funds, but let the fund perform in line with the respective index.

 

Advantages:

 

·                  Low transaction cost and expenses

·                  Market related risks

·                  No need to actively track the performance

 

Disadvantages:

 

·                  No flexibility to change investment style and strategy to minimize risk or boost funds performance

·                  Limited investment universe

·                  Less diversification across market capitalizations

 

Why are we here talking about active and passive funds, when our intention was to enlighten you about Diversified Equity Funds and Equity Exchange Traded Funds

 

Well, Diversified Equity Funds are actively managed funds and Equity ETFs are mostly passively managed funds but some fund managers are trying to make these ETFs actively managed by using re-allocation strategy but holding stocks from the selected Index itself.

 

As Equity ETFs despite being passively managed are soon catching the eyes of the investors with some recent innovative launches and ease to trade, so here we are going to talk about Equity ETFs and nothing about Index funds which continue to hold their old passive management style.

 

Now, that you are already aware of the advantages and disadvantages of both active and passive funds, let us first look at some of their performances in order to have a clear idea.
 

Popular posts from this blog

JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 JP Morgan launches Emerging Markets Opportunities Equity Offshore Fund    The new fund offer opens for subscription on 16 th June and closes on 30 th June. JP Morgan Mutual Fund today announced the launch of its open end fund of fund called Emerging Markets Opportunities Equity Offshore Fund. The fund will invest in an aggressively managed portfolio of emerging market companies in the underlying fund - JPMorgan Funds - Emerging Markets Opportunities Fund, says a JP Morgan press release. Noriko Kuroki, Client Portfolio Manager, Global Emerging Markets Team (Singapore), JPMAM said, "Emerging markets have been out of favour for several years, as growth decelerated and earnings struggled. However, in a world of globalisation, we believe that EM will eventually re-couple with DM, leading to the long-aw...
Read more

Jeevan Labh

 The Life Insurance Corporation of India has announced Jeevan Labh , its limited-premium, with-profits endowment plan .   It comes with a premium paying terms of 10, 15 and 16 years for corresponding policy tenures of 16, 21, and 25 years respectively. ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saving Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) Fund 9. Religare Tax Plan 10. Birla Sun Life Tax Plan Invest in Best Performing 2016 Tax Saver Mutual Funds Online Invest Online Download Application Forms For further information contact Prajna Capital on 94 83...
Read more

Nifty F&O

  1. What is a straddle? A strategy using Nifty options usually before a major event or when one is uncertain of market direction. Comprises purchase of a Nifty call and put option of the same strike price. Usually strikes are purchased closer to the level of the underlying index. 2. What is better ­ buying or selling a straddle? It depends.Implied volatili ty of options, or near-term expectations of price swings in an un derlier like Nifty , usually peaks before an event and falls when the outcome plays out ­ like Infy re sults in past years. However, once the event plays out, a sharp rise or fall in Nifty could result in price of the straddle rising ­ benefiting buy ers. But, normally , those who sell or write options charge hefty premiums from buyers in the hope that fall in volatility would ensure the options end out-of-the-money, hurting buyers. 3. So, do straddle sellers end up winning most of the time? Yes. That's invariably the case when market volatility is trending on the...
Read more

NABARD Tax Free Bonds 2016

Invest NABARD Tax Free Bonds Online NABARD  has come up with its Public Issue of Tax-free Secured Redeemable & Non-convertible Bonds opening on 09 th of March 2016.   What Are Tax Free Bonds: The Government of India vide notification 59/2015 dtd.6/7/2015 has authorized certain entities to issue tax -free secured redeemable non- convertible bonds during the Financial year 2015-16. The Bonds can be held either in physical or in D-mat mode. However, PAN is mandatory for investing in these bonds.   Issue Highlights: Issue Size Rs. 3500 Crores. The issue will  open on Wednesday, March 9, 2016 and scheduled to be closed on Monday, March 14, 2016. The Issue may close on such earlier date or extended date as may be decided by the Board or a duly constituted committee thereof. The Allotment will be on First Come First Serve Basis . The Rating is " CRISIL AAA" by CRISIL & "IND AAA" from IRRPL . The Bonds are offering Tax F...
Read more

HDFC Arbitrage Fund - Wholesale Plan dividend

HDFC Mutual Fund   has announced dividend under the dividend option of   HDFC Arbitrage Fund - Wholesale . The quantum of dividend shall be   Rs   0.04 per unit. The Fund House has also announced dividend under the dividend option of the following schemes: Schemes HDFC FMP 370D Sep 2013 (3) Reg-D HDFC FMP 370D Sep 2013 (4) Reg-D ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. Reliance Tax Saver (ELSS) Fund 10. Birla Sun Life Tax Plan Invest in Best Performing 2016 Tax Saver Mutual Funds Online Invest Online Download Ap...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now