New Delhi, Aug. 13 -- Active versus passive investing is a long-running debate among mutual fund investors. While active funds aim to beat their benchmarks through stock selection, passive funds seek to replicate an index at a relatively low cost.

But does paying for active management actually improve an investor's chances of earning higher returns?

Apurv Gupta, Founder & CEO, Otto Money, answered this question by analysing monthly rolling three-, five-, and seven-year periods from January 2013, when direct plans were introduced. The analysis covered active direct-growth equity funds across seven categories and about 44,500 fund-window observations.

Each active fund was compared with its benchmark after deducting 0.20% a year from the ...