Index vs Active Fund Calculator
Index Fund
Active Fund
1,07,71,715
1,13,99,757
6,28,042
Index Compounding vs Active Compounding Growth
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Index vs Active Net Return Model
Compares low-cost index funds with actively managed peers to evaluate if the active fund's higher alpha beats the cost drag.
Worked Example: ₹10,000 SIP for 20 years. Index: 12% gross (0.2% fee). Active: 14% gross (1.8% fee)
Index vs Active: How Rohan Beat 80% of Fund Managers by Doing Nothing
Rohan was tired of researching mutual funds. Every year, last year's top-performing active funds underperformed, while new ones took their place. He decided to invest his ₹10,000 monthly SIP into a simple Nifty 50 Index Fund. His colleagues laughed, calling it a 'lazy' strategy.
Twenty years later, the Nifty 50 Index grew at 12% gross (with a 0.2% index fund expense ratio), giving Rohan a net return of 11.8% and a final wealth of ₹97.4 Lakhs. His colleague invested in an active fund boasting a 14% gross return but carrying a 1.8% expense ratio, resulting in a net return of 12.2% and ₹102.4 Lakhs.
The active fund manager had to take significantly higher risk and beat the index by 2% gross every single year just to yield a tiny ₹5 Lakh advantage. Over 20 years, more than 80% of active large-cap funds in India fail to beat their benchmark indexes after accounting for fees.
Index funds offer low cost, transparency, and eliminate manager risk. For core equity allocation, passive index funds provide a highly efficient foundation. Use this comparator to see if your active fund is truly generating enough outperformance to justify its higher fee.
Frequently Asked Questions
What is the difference between Index funds and Active funds?
Index funds passively replicate a market index (like Nifty 50) and have very low fees. Active funds are managed by a fund manager who picks stocks to beat the index, carrying higher fees.
Do active funds beat index funds in India?
In the large-cap category, more than 75-80% of active funds fail to beat their benchmark indexes after accounting for higher expense ratios. However, active funds in mid-cap and small-cap categories still show outperformance potential.
How do fees impact the active vs passive decision?
Active funds typically charge 1.5% to 2.2% p.a., whereas index funds charge 0.1% to 0.3%. An active fund manager must outperform the index by at least 1.5% to 2% gross every year just to match the net returns of a passive index fund.
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