Okay, you must have heard that passive funds have beaten active largecap schemes in the last one year. Then you must have also heard that in developed markets like the USA, passive funds are the preferred method to invest in the stock market.
So, what is a passive fund? A passive fund, as the name suggests, follows a passive investment strategy – it just invests in an index. Its portfolio will reflect the constituents of the index in their exact proportion in the index.
