Though in developed markets passive management is popular, in emerging markets (including India) there are many fans of active management.
Saving and investing is must for everyone. As inflation leads to a price rise of essential commodities, your kitty should also grow over time to keep pace with inflation. While investing either you can choose to be an active investor and expect more return than market average, or you can choose to be happy with lower returns.
As the name suggests an active investment management style involves hands-on approach. An investor or the fund manager is expected to pick and choose the right security, at the right time and at the right price. The portfolio comprises hand-picked investment opportunities. At times, the investor may take shelter in safe haven options such as cash and gold. The idea is to outperform returns that the market gives.
Of course, it comes with its own set of costs – higher fees and the possibility of underperformance to the market as the fund manager or investor may go wrong.
Fund managers of actively-managed mutual funds decide on which stocks and sectors they should invest in. Though such funds have benchmark indices, too, but they are not bound to mimic them. They are benchmark agnostic; some deviate vastly from where their benchmark indices invest.