Passive funds have given a return of around 35 per cent in the last one year. The performance has attracted a lot of investors towards these funds. AUM increased from Rs 5.07 lakh crore to Rs 6.95 lakh crore in a year.
New Delhi. Many investors who invest in the stock market and mutual funds may not be aware of passive mutual funds. That too when this fund has given a return of about 35 percent in the last one year. The performance of passive funds in the last one year has attracted investors a lot towards these funds. In FY 2024, passive funds recorded an average return of about 35% and this is the reason why the assets under management (AUM) of exchange traded funds (ETFs) have increased from Rs 5.07 lakh crore to Rs 6.95 lakh crore in the last one year.
Most of the investment in passive mutual funds is coming from small cities and towns (Tier 2) and there has been the highest increase in investors here. Actually, passive funds track a benchmark index and try to mimic its performance. Passively managed funds include passive index funds, fund of funds that invest in exchange-traded funds (ETFs). These funds follow a benchmark and aim to give returns in line with the benchmark.
How does a passive mutual fund work?
Passive mutual funds include Nifty 50 Index, Nifty Midcap 150 ETF, etc. Given their simplicity, passive funds are a good entry point for youngsters who prefer to go with the market flow rather than actively pick. It also provides exposure to the larger markets. It picks the universe of all 50 stocks of Nifty or a single 50 with an edge. It offers the best of both the stocks.
The fund house’s viewpoint also changed
Given the growing popularity of passive funds, mutual fund houses have started looking at the Nifty 50 index from a different perspective to give better returns to investors. Nippon India Nifty 50 Value 20 Index Fund is a great example of this. This fund is designed to reflect the behavior and performance of a diversified portfolio of value companies that form part of the Nifty 50 index. It includes the 20 most liquid value blue chip companies listed on the NSE. By picking the top 20 stocks of the index, the fund has given a return of 34.26%. During this period, the Nifty 50 index has given a return of just 26.27%. The beauty of this index is that it picks stocks from the universe of Nifty 50, that too with special features.
Investors get double benefit
According to Sanjay Patel of Shri Hari Financial Services, ‘Passive investing gives an investor a dual benefit. First, it selects the right stocks based on certain factors and second, it keeps them in the format of an index fund.’ Investing in such smart beta indices is becoming quite popular, as investors are getting the benefit of low cost and the risk is also low.
Tags: Business news, Investment and return, Investment tips, Mutual fund
FIRST PUBLISHED : June 11, 2024, 18:05 IST