What is Passive Investing?

Presenting the best of investor education content, #CuratedByKuvera. This video by @Aditya Birla Sunlife Mutual Fund explains the benefits of investing in passive funds.

 

 

Passive funds like ETFs and index funds invest in a basket of stocks, mutual funds, or an index at a low cost. Thereby freeing you from the hassle of identifying and investing in individual stocks. As the fund manager simply has to replicate the portfolio of the underlying indexes.

 

A NIFTY 50 index fund would invest in the NIFTY 50 constituents in the same proportion as the NIFTY 50 index. The fund manager will have to rebalance the portfolio based on the movement of the NIFTY 50 index.

 

It is impossible to beat the market continuously, especially in the long run. Hence, constant buying and selling is unnecessary and returns eroding activity. Passive Investing is a strategy that seeks to maximize returns by minimizing trading.

 

Benefits of investing in Passive funds:

1. Cost-efficient

2. Hassle-free and transparent way of investing

3. Auto and timely re-balancing

4. Keeps emotional biases away

5. Option to choose from multiple indices

6. No need to track and research individual stocks

 

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#MutualFundSahiHai #KuveraSabseSahiHai #PersonalFinance #InvestorEducation

 

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