Index Funds are passively managed mutual funds and do not need active human intervention, designed to replicate a specific market index, such as the Nifty 50 or Nifty 100. These funds mirror the stock composition and weightage of the index and adjust whenever the index composition changes. These funds are ideal for investors who are comfortable earning index-level returns, prefer low-cost investments, and do not seek to outperform the market.

• Passive Management: No active decision-making or stock-picking by a fund manager.
• Low Cost: Since there is minimal human intervention, the expense ratio is lower compared to actively managed funds.
• Market-Matching Returns: Returns are almost the same as the performance of the chosen index. However, minor differences can occur due to Expense Ratio (The small fee charged for managing the fund) and Tracking Error (The slight deviation from the index performance due to execution limitations).

Active Funds are actively managed mutual funds where a professional fund manager selects stocks based on in-depth research, aiming to outperform the market index. These funds are ideal for investors who are willing to pay a slightly higher fee than index funds for higher long-term returns.

• Active Management: Fund managers continuously monitor the stocks and adjust the portfolio based on research and forecasts.
• Higher Potential Returns: Due to the active stock selection, these funds have the potential to generate returns thatbeat the market.
• Higher Costs: The expense ratio is slightly higher because of fund management and research-related costs