Active and Passive

I have been thinking of adopting a passive investment strategy and your cover story titled ‘Setting Sights on Index Funds’ did help me understand more about it. But looking at the long-term performance, active funds do beat the index. So, would it make sense to shift the approach towards passive investing altogether?

- Rajnish Kapadia

Editor Responds : Thank you for appreciating our story. Historically, yes active funds have generated better results than passive funds in India. However, the margin of outperformance is shrinking. Moreover, in the large-cap category, the outperformance has not been great. Hence, you should adopt a mix of active (small-cap and mid-cap) and passive (large-cap) investment for the long term.