What is active and passive fund?”

Active fund:

Every mutual fund has one or more fund managers.

The fund manager/s has a team of skilled people.

This team’s job is to make investment decisions — what to buy, what to sell, what to continue holding, etc.

The investment decision is made by people.

Such a mutual fund is called an active mutual fund.

Passive fund:

In passive mutual funds, the investment decision is made based on a certain formula.

Like, a fund may invest blindly in all the stocks present in Nifty 50 (index).

This fund would be called an index fund.

Nobody will check the companies’ balance sheets, revenue, earnings, etc.

No person is making any investment decision.