Active Mutual Funds: These funds are managed by fund managers who pick stocks to beat the market. They come with higher fees, higher risk and the potential for higher returns.
Passive Mutual Funds: They track a market index with minimal management. They have lower fees, lower risk and deliver market matching returns.
Impact:
Active funds may outperform or underperform the market depending on manager skill. Passive funds offer more predictable returns with less cost and risk.