Equity Asset Allocation Through ETFs

ETFs can be added to your portfolio to complement the active counterparts and build a diversified portfolio

The ETF popularity has been surging in India. While the majority of ETF investments in India are still routed through the institutional path, retail investors have also started taking interest in these passive investment avenues. This is because over the past few years, actively managed funds have been struggling to beat their benchmark and investors have to pay a higher fund-managementfees for these funds. So, investors are finding the simplicity and low-cost advantage of ETFs quite appealing.

So, in this active–passive debate, are ETFs really better? The answer is not as straightforward as it seems to be. While it’s true that active funds have higher costs, their history of generating outperformance over the benchmarks can’t be entirely overlooked, especially in the mid-and small-cap segments.