Financial investments are becoming more mainstream as an increasing number of young people enter the markets. Whether for tax savings or a growing interest in investments, people are increasingly willing to take risks, be it through investments in direct investments in equities or mutual funds. With more people entering the market, there is also increased confusion about the best investment strategies.

Radhika Gupta, the managing director and CEO of Edelweiss Mutual Fund took to social media firm to address the growing debate in the investment space. Gupta, speaking of active and passive funds, said that investors must rather focus on understanding the credibility of the fund. She emphasised “understanding funds for what they are individually – good or bad.”

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An actively managed fund involves a fund manager who plays a key role in decision-making. They actively manage which stocks and bonds are added to or removed from the mutual fund portfolio and determine the timing of these changes. In contrast, a passive fund tracks a benchmark index and aims to replicate its performance. Passively managed funds can include passive index funds or exchange-traded funds (ETFs).

The Shark Tank judge noted that there are excellent active funds available, as well as poor passive ones, and the opposite is also true. She suggested investors concentrate on important metrics before putting in their money.

“In passive, since the category is newer and evolving, more rigour needs to be applied in looking at the index behind the fund…It isn’t as simple as buying an index fund based on last 1 or 3 year returns,” the Edelweiss CEO said.

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