Active and Passive Equity Funds

Active and Passive Equity Funds mind map
  Context
    Active equity funds
      higher net inflows than passive
      in Q2 FY24
  Equity fund definition
    mutual fund investing in stocks
    high risk for long-term
    substantial returns over time
    categorized by company size
      small-cap
      mid-cap
      large-cap
  Mutual fund operation
    collects money from investors
    invests in securities
      debt
      equity
      both debt and equity
  Active Equity Funds
    manager's role
      active in stock selection
    expense ratios
      higher due to active management
    portfolio management
      driven by various strategies
    trading frequency
      higher
    capital gains tax
      higher if held under 1 year
    returns
      relatively higher
    applicability
      for alpha generation favouring investors
    examples
      ELSS Equity Linked Saving Scheme
  Passive Equity Funds
    manager's role
      passive tracking of index
    expense ratios
      lower due to passive management
    portfolio management
      driven by benchmark index
    trading frequency
      lesser
    capital gains tax
      lesser if held under 1 year
    returns
      typically lesser
    applicability
      for market index allocation seekers
    examples
      Index mutual funds
      Exchange-Traded Funds ETFs
  Expense ratio explained
    annual maintenance charge
    finances fund expenses
      operating costs
      management fees
      allocation charges
      advertising costs
  Capital gains taxes
    owed on investment profits
    if held for at least 1 year

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