What is the difference between active and passive investing?
Feature
| Active Investing
| Passive Investing
|
1. Meaning | Trying to beat the market by picking specific stocks or funds | Tracking the market by investing in an index (like Nifty 50 or Sensex)
|
2. Who manages it? | Fund manager or investor actively makes decisions
| Automatically follows an index with minimal changes
|
3. Strategy | Frequent buying and selling based on research, timing
| Buy-and-hold strategy with long-term focus
|
4. Cost | Higher (due to management fees and transaction costs)
| Lower (fewer transactions, minimal management)
|
5. Risk | Higher risk due to market timing and stock selection
| Lower risk as it spreads money across many companies
|
6. Returns | Can be higher—but not guaranteed
| Usually matches market returns
|
7. Examples (India) | Actively managed mutual funds
| Index funds, ETFs like Nifty 50 ETF, Sensex ETF |
8. Suitable for | Investors who want to try and outperform the market and are okay with higher risk
| Beginners or long-term investors looking for steady growth.
|
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