Mutual Fund is like a basket of stocks which you can invest in. There are multiple types of Mutual funds covering your investment style. But mostly there are two types Active and Passive Mutual Fund.
Active Mutual Fund is one where there is a Fund Manager who applies all the strategies and thus try to beat the market and get that alpha. Whereas teh passive fund is actively following an index. If the index gives 12% returns then you can expect passive fund to give around 11.8 to 11.9%. Active funds are little costly because you have to give expense ratio I.e. a fee to the fund manager to handle the portfolio. You have to give fee in Passive Mutial fund too but is quite low.
We cannot go all Active because then expense ratio is high as well as many Active Mutual fund cannot beat the index. You cannot go all Passive because then you will not get Alpha. And that's why I have created a strategy where I am taking the best of both worlds. I am investing in Active + passive Mutual fund so that my portfolio is less risky as well as can generate that extra Alpha.
I am investing 60% to the Passive Funds and 40% to the Active funds and thus this strategy is better risk adjusted as well as gives good return too. You can watch the video above to see which Passive Fund and Which Active funds I am investing and what is my thought process in investing in these funds. So basically it's all about taking the benefit of both the world's in your portfolio and not confined to any of the individual strategies.
I am investing in 60 Passive and 40 Active but you can also change the strategies best suited as per your risk appetite which also mentioned in the Video.