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How Passive Funds Help Diversify

Outlook Money

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November 2024

Passive funds provide a simple way to invest in broad markets as well as in specific themes and sectors, making them ideal for an investor's satellite portfolio

- VARUN GUPTA

How Passive Funds Help Diversify

In recent years, investing in passive funds has gained a considerable momentum in India, aligning With global trends. While actively managed funds continue to form the backbone of many portfolios, passive strategies-particularly exchange-traded funds (ETFs) and index funds-are increasingly being recognised for their simplicity, cost efficiency, and transparency. A unique advantage of passive funds is their ability to provide not only broad market exposure, but also access to niche sectors and thematic investments, such as electric vehicles (EVs), defence, power, and other emerging trends. These funds allow investors to gain targeted exposure to specific industries or themes without the complexities and risks associated with active stock selection. According to data from the Association of Mutual Funds in India (Amfi), as of September 2024, the total assets under management (AUM) of passive funds surged to ₹1 1.2 lakh crore, marking an impressive 45 per cent growth year-

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