{"id":24203,"date":"2022-01-05T10:13:45","date_gmt":"2022-01-05T10:13:45","guid":{"rendered":"https:\/\/www.tatacapital.com\/blog\/?p=24203"},"modified":"2025-06-24T13:05:06","modified_gmt":"2025-06-24T13:05:06","slug":"why-passive-investing-makes-a-lot-of-sense-for-long-term-sip-investors","status":"publish","type":"post","link":"https:\/\/www.tatacapitalmoneyfy.com\/blog\/sip\/why-passive-investing-makes-a-lot-of-sense-for-long-term-sip-investors\/","title":{"rendered":"Why Passive Investing Makes a Lot of Sense for Long Term SIP Investors"},"content":{"rendered":"\n

<\/p>\n\n\n\n

‘Passive investing’ means investing in passive funds. Unlike active funds, fund managers do not actively manage passive funds.<\/p>\n\n\n\n

So, how does a passive fund generate returns? Passive funds try to replicate the growth of a market index, called a benchmark index by investing in similar securities as that of the index. A market index is a hypothetical portfolio of investment holdings in a market segment. Thus, a passive fund’s portfolio will contain stocks or securities of similar weightages as its chosen benchmark index. <\/p>\n\n\n\n

Passive funds generate returns similar to their benchmark index. If you want to invest in mutual funds<\/a> <\/a>for the long term, go for a passive fund. Read this article to learn why. <\/p>\n\n\n\n

Buy and hold<\/strong><\/h2>\n\n\n\n

Passive investing follows the principle that market indices tend to grow upwards over a long period. For instance, Sensex was around 5000 points in the 2000s, but currently it stands at 56k points. <\/p>\n\n\n\n

Thus, passive investing allows you to buy and hold your assets for a long time instead of changing market strategies and risking your returns. Therefore, passive investing can profit those who remain invested for long durations.<\/p>\n\n\n\n

Additional Read –<\/strong>Why are SIPs an Ideal Choice for the First-time Investor?<\/a><\/p>\n\n\n\n

Superior returns in the long term<\/strong><\/h2>\n\n\n\n

When it comes to passive vs active investing, the former often wins in the long term. <\/p>\n\n\n\n

Fund managers of active funds try to beat the returns of a benchmark index. However, in recent years, active funds have underperformed in the long term. As per a report by SPIVA (S&P Indices versus Active), the performance of Indian equity-oriented funds in the large-cap category over 10 years is 7.98%. Meanwhile, S&P BSE 100 index delivered a 10-year CAGR of 8.13%. <\/p>\n\n\n\n

Diversification<\/strong><\/h2>\n\n\n\n

Passive investing entails mirroring the portfolio of a market index. <\/p>\n\n\n\n

This strategy, a key benefit of sip investment<\/a>, ultimately diversifies your investment portfolio across various sectors and companies.Thus, you are safe from sector-specific or company-specific downturns.<\/p>\n\n\n\n

Inexpensive<\/strong><\/h2>\n\n\n\n

When you invest in active funds, you pay a fee to the fund manager, known as the expense ratio. This expense ratio is a percentage of your returns. Since fund managers do not actively manage passive funds, their expense ratio is low.<\/p>\n\n\n\n

When you invest in any passive fund through SIP route, you get the benefits of compounding and get substantial returns in the long term.<\/p>\n\n\n\n

So, for an active and passive fund that generates the same amount over the same period, your returns will be higher in passive funds because you will not have to pay a hefty expense ratio.<\/p>\n\n\n\n

Additional Read –  <\/strong>Understanding the Power of Systematic Investment Plan<\/a><\/p>\n\n\n\n

Start investing!<\/strong><\/h3>\n\n\n\n

Are you ready to invest in passive funds but don’t know where to begin? Let Tata Capital’s Moneyfy app<\/a> do the work for you! Using Moneyfy, you can set a goal, assess your risk profile, and browse through fund recommendations tailored for you.  <\/p>\n\n\n\n

So, download the app, complete the quick online KYC process, and you will be ready to invest in just a few days. You can start your investment journey with Mutual Funds SIP<\/a>, ensuring a disciplined and long-term approach to wealth creation.<\/p>\n\n\n\n

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Download Moneyfy App<\/a><\/div>\n<\/div>\n<\/div>\n\n\n\n
<\/div>\n<\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"

‘Passive investing’ means investing in passive funds. Unlike active funds, fund managers do not actively manage passive funds. <\/p>\n

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