With the introduction of Mutual funds in India in 1963, the Indian investor has shown positive response to mutual fund investments which is evidenced through increasing AUM (Assets Under Management) every quarter. So far as management style is concerned the industry offers two options to the common investor- on one hand the passively managed funds with the sole objective of replicating their benchmark index and on the other the actively managed funds where the fund manager continuously puts his efforts to enhance the returns, by making frequent changes in the composition of the portfolio. The common investor with limited savings cannot be expected to hold too many funds in his portfolio. Further with limited exposure to financial concepts and complexities he is left guessing on the right combination of funds that should constitute his small portfolio. This paper is a sincere attempt to address the above mentioned situation. We have empirically tested and shown that given the restricted savings which combination, either only two passively managed funds, two actively managed funds or a portfolio comprising of one of each type will win the race for the investor. This paper will be of interest, particularly to the small investors, academicians as well as the financial advisors
