Index Mutual Fund Investment: The market is in turmoil due to the Ukraine-Russia war. There is turmoil in the market not only in India but around the world. Mutual funds are giving good returns amidst all the ups and downs of the market and the attention of investors is increasing here. And in mutual funds too, the trend of investors towards index funds has increased a lot.
Market experts say that index funds are a good option for investors who do not want to take much risk in the market. The cost of investing in index funds is low and it comes in the risk free category.
In view of the changing trend of investors, all the fund houses like HDFC Mutual Fund, ICICI Prudential Mutual Fund, IDFC Mutual Fund, Axis Mutual Fund All mutual fund houses, including Nippon Life, SBI Mutual Fund, have also started focusing on index fund products.
Also read- Link savings account before March 31, otherwise there will be loss, interest will not be available in cash
What are Index Funds
Index Funds Mutual Fund invests in stocks that mimic a stock market index like NSE Nifty, BSE Sensex etc. The fund manager invests in the same securities as present in the underlying index in the same ratio and does not change the portfolio composition. These funds offer returns in comparison to the index they track.
Index funds are similar to equity funds. These funds track the movement of indices like Sensex or Nifty. If an index fund tracks the Nifty 50, then the stronger the Nifty 50, the higher will be the rise in the index fund. An index fund invests in all the securities that the index tracks. Where an actively managed mutual fund tries to outperform its underlying benchmark, a passively managed index fund tries to match the returns offered by the underlying index.
So index funds are in demand when the market is volatile this year. According to the information, the number of folios in the index fund has more than doubled to more than 23 lakh in March. It was a little over 10 lakh till the end of March last year.
Index mutual funds are called passive funds. These funds invest in the same securities as the index they track. Since the fund manager follows only the asset allocation pattern of the underlying index, there is no investment strategy followed by the fund.
The expense ratio is low in index funds. It reduces the cost of investment. As per the rules, the expense ratio for an index fund cannot exceed one per cent of the daily net assets.
Instead of investing money in a single stock, it is invested in the stocks included in the index. Hence the portfolio of the investor gets diversified.
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Tags: investment tips, Mutual funds, Share market, stock market
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