A fund’s active share percentage shows how different a mutual fund’s portfolio is from its benchmark index. A higher active share means the fund manager is actively picking stocks and trying to beat the index. A lower active share means the fund is closely following the index. It helps investors understand the fund’s strategy and if they are paying for real active management.

What Does Active Share Percentage Mean?

Active share percentage tells how much a fund’s holdings differ from its benchmark index. It is shown as a percentage from 0% to 100%. A 100% active share means the fund is completely different from the index, while 0% means it copies the index exactly. It shows if a fund manager is really trying to beat the market or just mimicking it.

Why Is Active Share Important for Investors?

Active share helps you understand if the fund is truly active or just following an index with higher fees. If you are paying for active management, you want the fund to be different from the index and have a good chance to beat it. A higher active share means the fund manager is taking unique decisions to try and give better returns.

What Is a Good Active Share Percentage?

A good active share is usually above 60%. It means the fund is taking different positions from the index and trying to perform better. If a fund has less than 20% active share, it is likely acting like an index fund. In that case, it may be better to invest in a low-cost index fund instead.

How to Use Active Share in Fund Selection?

When choosing a mutual fund, look at its active share along with past performance and fees. If the active share is high, make sure the manager has a good track record. A high active share without good returns may not be worth the higher cost. Use it as one part of your decision-making process.

Does High Active Share Always Mean Better Performance?

Not always. A high active share means the fund is different from the index, but it does not guarantee better returns. The fund manager must make smart decisions for the fund to do well. So always check returns, risk level, and investment strategy along with active share before investing.