Smart Investing

Ever wondered which is the world’s largest mutual fund scheme? You will be surprised to know it is an index fund in an industry that swears by active funds. Launched by John Bogle in 1976, First Index Investment (now Vanguard 500 Index Fund) had only $1 billion in assets under management (AUM) till 1990. It now has an AUM of over $700 billion.

Index funds (also called passive funds) invest in stocks that comprise an index such as the Nifty50, the Bank Nifty, etc. These are cheaper than active MFs that rely on stockpicking by fund managers.

Of the top 10 funds in the US, nine are passively managed index funds. According to boutique portfolio management service firm QED Capital, PMS in the last 10 years in the US, active mutual funds saw an outflow of $1.2 trillion and index funds/ETFs an inflow of $1.4 trillion. As on March 2021, the US MF industry had $14.25 trillion worth of active assets and $10.62