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Index Funds
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An index fund is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Nifty 50 for example.
When Nifty 50 is being rebalanced, the index fund also gets changed.
Investing in Index funds makes sense because it mitigates the risk of failures that are possible in Direct equity shares.
Thus, Index fund is better than direct equity shares for the conservative investors or for those who do not have time to do analysis and take investing decisions.
The next question we come across is, are Index funds better than fund manager managed schemes?
The answer is Yes and No.
Yes because if there is a scheme that is efficiently managed by a fund manager, such schemes often outperform.
No because if the scheme you picked is not efficiently managed by the fund manager, the index fund would outperform.
In general, in the case of all schemes, fund managers strive to beat the index.
The closest alternative to Index funds is Exchange Traded Funds but for investing in ETFs, you need to have a demat account as well as a broker login to place your orders.
Liquidity in ETFs too is less.
In general, it is safe to have an index fund of the corresponding benchmark in line with your investing goals.
Please suggest 2 good index funds
UTI Nifty Index Fund Or ICICIPru Nifty Next 50 Index Fund
Index Funds are those mutual fund schemes that replicate an Index.
As we know, there are different types of Indices - those that track BSE Sensex 30, NSE Nifty 50, Nifty Large & Midcap Index etc.
There are smallcap and other varieties of indices however Mutual Funds have not yet started schemes on broader indices.
At our seminar, I will explain the strategies that one can build for efficient building of Index-based portfolios.
Related Lessons
- Equity Mutual Funds
- Debt Mutual Funds
- Balanced Funds
- Diversified Multicap Equity Funds
- Equity Linked Savings Schemes (ELSS)
- Equity Savings Mutual Funds
- Liquid Mutual Fund Schemes
- Ultra Short Term Mutual Fund Schemes
- Short-term Debt Mutual Fund Schemes
- Capital Protection-Oriented Funds
- Arbitrage Mutual Fund Schemes
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