Active vs Passive: How Chitra learned to choose the best mutual fund strategy for her investments!
A story of a girl's journey into the world of mutual fund investing, and the insights she gained about active and passive investment strategies along the way
Chitra had been pacing up and down the hall for last half an hour, in deep thought. She was fascinated by the world of finance and investing, and had been reading books and articles about it for some time. But she couldn’t decide which investment strategy would work best for her. Lately, she had discovered that there were two main strategies for investing in mutual funds: active and passive.
Active mutual fund managers try to beat the market by selecting individual stocks and bonds that they believe will perform well. They use research and analysis to make these decisions, and may make frequent changes to their portfolios in an attempt to achieve the best results.
Passive mutual fund managers, on the other hand, simply track a market index such as the S&P 500, NIFTY 50. They do not try to beat the market, but rather aim to match its performance by investing in the same stocks and bonds as the index.
As Chitra learned more about these two strategies, she began to wonder which one was the best for her. She decided to talk to her friend, Anuradha, a financial advisor to get some expert advice.
Her friend explained that there were pros and cons to both strategies. Active funds may have the potential for higher returns, but they also come with higher fees due to the research and management involved. Passive funds have lower fees, but may not perform as well as active funds in certain market conditions.
Chitra thought about this for a while, and decided that she would prefer to invest in passive mutual funds. She liked the idea of a more hands-off approach to investing, and felt that the lower fees would help her to maximize her returns in the long run.
With her newfound knowledge, Chitra began to research different passive mutual funds and selected a few that she felt were a good fit for her investment goals. She felt confident that she had made a smart decision and was excited to see how her portfolio would perform over time. By actively planning her investments, she was able to reach financial goals.
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Originally published at https://www.linkedin.com/pulse/active-vs-passive-how-chitra-learned-choose-best-mutual-priyanka-nath