Passive investing appears to be gaining momentum. This is borne out by the National Stock Exchange’s (NSE) recent announcement that the assets under management (AUM) of passive funds which track the Nifty indices has surpassed Rs 5 lakh crore.
“Passive investing reduces non-systemic risk, which refers to stock selection and portfolio manager selection. These are risks over and above market risk, which may not necessarily result in a higher expected return over the index,” says Hemen Bhatia, head exchange-traded fund (ETF), Nippon Life India Asset Management.
Investors may go for ETFs or index funds when taking the passive route. Both mimic an underlying index. While an index fund can be purchased through a mutual fund distributor or from the fund