which mutual fund category is best to invest?? active or passive?? which category charges highest expense ratio?
Ans: Active or Passive is actually not any categories of mutual funds (MFs) but the way securities (stocks, bonds etc) held in a particular MF are managed. When we say categories, then we refer to Large Cap, Mid Cap, Small Cap, Infra etc in Equity MFs and Ultra Short, Short, Money Market, Dynamic Bond etc in Debt MFs.Coming to your question, if we only look at the charges part, obviously Passive funds are cheaper than Active funds because there is nobody actually ‘managing’ the MF in case of Passive MFs. Here a passive index has been created and the entire fund aligns the portfolio exactly as per that index and tries to minimise the ‘tracking error’.On the other hand, in Active MFs, there is a fund manager and his complete research team who are researching the securities, taking decision on what to buy, hold, or sell, and finally monitoring the entire portfolio all the time vis a vis performance benchmarks and indicators. Hence, the costs are higher in case of Actively managed funds.