Objectives: The fund’s objectives dictate how the portfolio is managed and what investments are included.

While both index funds and mutual funds provide portfolio diversification, significant distinctions should be considered: Index funds are a preferred choice for many Indian investors, particularly those with a long-term, passive investment strategy, due to their lower costs and consistent performance tracking of market benchmarks. The key objective of index funds is to mirror the returns and movements of the underlying index. These funds may include all of the holdings within the index or a representative sample of them. Index funds in India function by replicating the holdings and weightings of securities within the chosen index, aiming to match the benchmark index’s performance as closely as possible. In the Indian context, an index fund is not a distinct investment vehicle but rather a type of passively-managed mutual fund designed to closely track the performance of specific market indices, such as the Nifty 50 or the Sensex. Other common goals for mutual fund investors include saving for emergencies or a child’s college education. Mutual funds are a good fit for retirement savings because they provide broad diversification. For those who own shares of mutual funds, retirement is the most common goal. Generally through automated or mostly hands-off systems that cost less to manage, resulting in lower fees. Passively-managed mutual funds: Passively-managed mutual funds mimic the performance of market indices. Actively managed funds typically have higher fees associated with them. Mutual funds can be actively or passively managed:Īctively-managed mutual funds: In an actively-managed mutual fund, an investment professional or team of portfolio managers selects the investments for the fund with the goal of outperforming a stock market benchmark. These professionals make crucial decisions regarding what assets to purchase, sell, and trade on behalf of the fund’s shareholders, aiming to optimize returns and manage risks effectively within the Indian investment landscape. The fund’s dedicated investment manager is responsible for deploying the fund’s assets across a diverse array of assets, including stocks, bonds, and other securities. When an individual acquires a share of a mutual fund, they essentially obtain a portion of ownership in the fund, entitling them to a proportionate allocation of the income and capital gains generated by the fund. In the Indian context, mutual funds are meticulously managed investment vehicles that pool funds from numerous investors. On BlackBull Market's secure website What Is a Mutual Fund?