Active Funds: Smart Investing Even During Market Downturns

Many people think that actively managed mutual funds only do well when markets are rising. But even when the market becomes shaky, smart fund managers can protect and grow your money. A recent drop in the market from September 26, 2024, to January 21, 2025, shows this perfectly.

The Numbers Speak

The Nifty 50 Index, which shows how the stock market is doing, dropped by 12.2%. But guess what? Over two-thirds of actively managed funds did better than the market. They lost less money than the index, helping to protect your wealth. This shows that active fund managers have the skills to make smart decisions during tough times. They aren’t just following the market; they carefully choose where to invest your money.

Why Do Active Funds Do Better in Tough Times?

Passive funds, which simply follow the index, have to keep all the stocks—even the ones that are losing value. This can make them lose money when the market drops. Active fund managers, however, can:

– Choose strong companies and avoid weak ones.
– Adjust their portfolios to find good deals when stocks are cheap.
– Manage risks to minimize losses.
– Get ready for a quick recovery when the market improves.

This flexibility helps active funds perform better during market ups and downs.

The Long-Lasting Benefits of Active Funds

There’s a saying: “Form is temporary; class is permanent.” Passive funds can do well in calm markets, but they often struggle because they can’t adjust quickly. Active funds, on the other hand, continually show their worth by:

– Choosing the best stocks.
– Managing risks effectively.
– Navigating through both good and bad market times.

The recent market drop proves that paying for active management can really pay off, especially when things get unpredictable.

Conclusion: Balance is Key

The recent market drop shows that active funds can help manage risks and find opportunities, while passive funds provide a low-cost way to invest. A mix of both types of funds can help investors stay strong and grow their money no matter what happens in the market.