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

Post Office Deposits Interest Rates

Best SIP Funds to Invest Online   SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further information on Top SIP Mutual Funds contact  Save Tax Get Rich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com
Read more

HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO

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     HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO will be open for subscription from 16th May 2014 to 30th May 2014. The key features of the scheme are as mentioned below:   Type of Scheme A Close Ended Capital Protection Oriented Income Scheme Benchmark Crisil MIP Blended Index Fund Manager Mr. Anil Bamboli , Mr. Vinay R Kulkarni & Mr. Rakesh Vyas New Fund Offer (NFO) Period 16 th May 2014 to 30 th May 2014. Minimum Application Amount Rs. 5000 and in multiples of Rs.10 thereafter Plans/ Options Offered Growth and Dividend Payout Facility Liquidity To be listed For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
Read more

How to PPF Account extension after maturity

A PPF account can be retained after maturity without making any further deposits. The balance will continue to earn interest till it is closed. Public provident fund or PPF remains one of the most popular savings options for the long term despite a gradual decline in interest rates over the years. PPF accounts have a maturity period of 15 years and they can be extended. If there is no fund requirement, financial planners say, PPF account holders should extend the account beyond 15 years. In terms of income tax implications, PPF accounts enjoy the benefit of EEE (exempt-exempt-exempt) status . Under Section 80C, contribution up to Rs 1.5 lakh in a financial year qualifies for income tax deduction. The interest earned and maturity proceeds are also tax free. What are your options when a PPF account matures? 1) A PPF account can be closed after the expiry of 15 financial years from the end of the year in which the account was opened. 2) The subscriber can retain his
Read more

SUNDARAM SELECT MIDCAP

Best SIP Funds Online   SUNDARAM SELECT MIDCAP is a mid-cap focused fund has shown remarkable consistency in outperforming both its benchmark index and the category over many years. It takes a sharper tilt towards mid-caps compared to its peers. While the fund manager used to take large positions in his conviction picks, he has moderated exposure to his top bets over the past year. He has also chosen to stay away from capital guzzling businesses instead favouring those with efficient capital allocation practices. SUNDARAM SELECT MIDCAP fund boasts of a superior risk-reward profile compared to many of its peers, and while it has underper formed slightly over the past one year, its proven track record in the hands of a capable fund manager provides comfort. It remains a worthy pick in the midcap basket. SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further inform
Read more

HDFC Prudence Fund - Invest Online

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   HDFC Prudence Fund Balanced funds are excellent investment options for investors with moderate risk tolerance, since they give very good risk adjusted returns. It is very surprising why balanced funds are not nearly as popular as diversified equity funds, despite being around in India for nearly two decades. Balanced funds are essentially hybrid funds with both debt and equity in its portfolio mix, to balance the portfolio risk. These portfolios typically hold up to 70% of its portfolio assets in equities and the balance in fixed income. On a risk adjusted basis, balanced funds have delivered excellent returns compared to other equity fund categories, e.g. large cap or diversified equity mutual funds. The chart below shows a comparison of category returns between large
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