Employee money guide

Index Funds vs Active Funds

Compare index funds and active mutual funds on cost, portfolio strategy, performance expectations, and investor behaviour.

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Direct Answer

Index funds try to track a market index at low cost. Active funds try to beat a benchmark through fund manager decisions.

Key Takeaways

Index funds focus on tracking and low cost.
Active funds depend on manager skill and process.
Investor discipline matters in both.

How index funds work

Index funds replicate or track a benchmark such as a broad market index. They usually have lower expense ratios than many active funds.

How active funds work

Active funds select securities based on research and strategy. They may outperform or underperform the benchmark after costs.

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FAQs

Are index funds safer than active funds?

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Not necessarily. They still carry market risk. The difference is mainly strategy, cost, and tracking approach.

Reviewed by the Saventh Financial Literacy Team. Educational information for Indian employees — not personalised advice. Mutual fund investments are subject to market risk. Saventh AMFI ARN 324457.

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Saventh Investment is an AMFI Registered Mutual Fund Distributor.

Disclaimer: Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund, or designing a portfolio that suits your needs.

Saventh Investment makes no warranties or representations, express or implied, on products offered through the platform of Saventh Investment. It accepts no liability for any damages or losses, however, caused, in connection with the use of, or on the reliance of its product or related services. Terms and conditions of the website are applicable.
Investments in Securities markets are subject to market risks, read all the related documents carefully before investing.

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ARN - 324457