If you are a youtube watcher, you could have seen many videos suggesting Index funds. Index fund are nothing but all your money invested in Nifty 50 Index in same proposition and composition.
This fund category is famous for one another reason too, "Expense Ratio".
All those people on TV convince their audiance saying Index Fund saves money for investor because it has low expenses comparing "Active" funds.
Active funds are those funds, where fund manager puts his ideas and blood to generate additional returns over and above "Index aka Benchmark"
So he charges fees for his job in "Expense Ratio"
*What is the case now?*
As you know the story behind "Adani", the best performing stock in Index, is undergoing a bad phase. And, being a Index fund, investors money cannot removed from "Adani" stock to save from fall. Whatever happens, Index fund investors has to stay full course to ride down in share price.
Whereas, the Active fund where the fund manager picks stock as per his ideas avoided "Adani" stocks in first place right from beginning.
Now as an investor - What you want from a fund manager?
Just invest in Index fund to save the fees?
Or, to pay fees and let him save you from stock specific risk?
*****
In table: The active fund which avoided "Adani" delivered better returns compared to "Index Fund" where the "Adani" is still a part.
This fund category is famous for one another reason too, "Expense Ratio".
All those people on TV convince their audiance saying Index Fund saves money for investor because it has low expenses comparing "Active" funds.
Active funds are those funds, where fund manager puts his ideas and blood to generate additional returns over and above "Index aka Benchmark"
So he charges fees for his job in "Expense Ratio"
*What is the case now?*
As you know the story behind "Adani", the best performing stock in Index, is undergoing a bad phase. And, being a Index fund, investors money cannot removed from "Adani" stock to save from fall. Whatever happens, Index fund investors has to stay full course to ride down in share price.
Whereas, the Active fund where the fund manager picks stock as per his ideas avoided "Adani" stocks in first place right from beginning.
Now as an investor - What you want from a fund manager?
Just invest in Index fund to save the fees?
Or, to pay fees and let him save you from stock specific risk?
*****
In table: The active fund which avoided "Adani" delivered better returns compared to "Index Fund" where the "Adani" is still a part.
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