ACTIVE VS. PASSIVE MUTUAL FUNDS: A RISK-ADJUSTED PERFORMANCE COMPARISON

This research paper examines the comparative performance of active and passive mutual funds within the Indian financial market, emphasizing risk- adjusted returns. Using both primary and secondary data, the study analyzes investor perceptions, fund performance, and behavioral biases influencing investment choices. The findings reveal that while investors continue to prefer active funds for perceived managerial expertise, empirical evidence highlights that passive funds offer more consistent and cost-efficient performance. Key ratios such as Sharpe, Treynor, and Jensen’s Alpha indicate that passive funds deliver steadier returns when adjusted for risk and expenses. The study also identifies that awareness of risk metrics among investors remains low, leading to perception-driven rather than data-driven decisions. Overall, the research contributes to financial literacy, offering valuable insights for investors, fund managers, and policymakers to develop balanced, informed strategies for mutual fund investments in India.