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In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/492
In active investment, fund managers are in control and manage the fund at their discretion. In passive investment, the insurance company is in charge of everything.
There are two ways to manage your mutual fund portfolios: Actively and Passively. Mutual fund portfolio management refers to how the fund manager handles the underlying assets (equity, debt, gold, etc.). Handling the portfolio asset means the fund manager buying and selling the portfolio assets. However, it is important to understand the difference between active and passive investments to get a clearer insight into how the funds are managed. This will give you more clarity on the type of policy you would like to opt-in the future as per your financial goals.
In this article, you will learn what is active vs passive investment and how active and passive investments are different from each other. In addition, you will know which passive and active strategies are followed in investment, along with other details regarding active trading vs passive trading.
To understand the core difference between active and passive investment, you will need to understand the core functioning of active trading vs passive trading.
Active investing refers to the fund actively managed by the fund manager of the policy or plan you have invested in. In this type of investment, the fund manager has overall control and can manage the buying and selling of the portfolio assets and is highly involved in selecting stocks and bonds to be included in the portfolio. Basically, in active investing, the fund manager has greater control of the policy matters.
Passive investing refers to the funds that the fund manager is passively managing. The fund manager has no role and is not involved in investment decisions. In this type of investment, the insurance company takes ownership of all the policy and plan matters and manages the strategies themselves.
Having understood the basic difference between passive and active strategies, you must now have a much deeper understanding of active vs. passive investment.
Let’s look at the advantages and disadvantages of Active vs. Passive Investment to understand what will fit correctly into your investment goal.
|
Active Investment |
Passive Investment |
Strategy |
Fund managers are in control and manage the fund at their discretion. |
The insurance company is in charge of everything. |
Expense ratio |
High |
Medium to low |
Returns |
Fund managers can manage high returns |
Low |
Risk |
Very High |
Minimal to no risk |
Deeper knowledge and a clear understanding of each investment type is of utmost significance to ensure proper portfolio management. With a better understanding and clarity on what active and passive investment means, you can now determine how you would want your portfolio management to take place.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/521
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
