{"id":2586,"date":"2021-12-04T07:50:14","date_gmt":"2021-12-04T02:20:14","guid":{"rendered":"https:\/\/aayushbhaskar.com\/?p=2586"},"modified":"2021-12-12T16:22:03","modified_gmt":"2021-12-12T10:52:03","slug":"top-indian-index-funds","status":"publish","type":"post","link":"https:\/\/aayushbhaskar.com\/top-indian-index-funds\/","title":{"rendered":"7+ Best Index Funds in India","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"
As per a survey conducted by SEBI on the investment scenario in urban India<\/span> , only about 28.4% of people are aware of mutual funds. <\/span><\/p>\n
That\u2019s alarming because mutual funds are by far the most advertised mode of investment in India. <\/span><\/p>\n
Chances are, even fewer people are aware of Index funds and their investment potential. Let\u2019s learn more about that.<\/span><\/p>\n
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Source : https:\/\/www.sebi.gov.in\/sebi_data\/attachdocs\/1491452612271.pdf<\/a><\/em><\/span><\/p>\n Let\u2019s start by learning a few terms. <\/span><\/p>\n So what is a market index? <\/strong><\/p>\n A stock market consists of a lot of stocks and debentures from a set number of companies. <\/span><\/p>\n For example, the BSE or Bombay Stock Exchange makes up the stock of 30 big-capital companies. An index is basically a total of the performance of all these companies together. <\/span> There are a lot of methods employed by different markets, the most common of which is aggregating the market capital and the price of shares of each company.<\/span> For example, if an Index Fund tracks the BSE, it will invest in all funds of the BSE or a portfolio of funds from the BSE. <\/span><\/p>\n The portfolio of funds is usually based on parameters like market size, industry sector, and so on.<\/span><\/p>\n Index Funds are quite similar to Mutual Funds. In fact, in India, the two terms are almost used as synonyms.\u00a0 <\/span> The major difference between Mutual funds and Index funds is in the investment strategy. <\/span><\/p>\n Index Funds track the index of a given market and their performance is directly proportional to the performance of the financial market they track. Mutual Funds on the other hand, track the market to outperform the market. An example will make this clear.<\/span><\/p>\n An Index Fund based on the BSE will perform as per the performance of the BSE.<\/p>\n This is because it will have an investment in all the stocks and debentures of the BSE. A Mutual Fund based on the BSE will choose from high-performing stocks of the BSE so as to gain higher profits and outperform the performance average of the market.<\/p>\n An Index Fund aggregates the market average while a Mutual Fund (tries to) aggregate the highest profits from active trading.<\/p>\n Index Funds are passively managed while Mutual Funds are actively managed.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Since Index Funds invest in all or almost all stocks and debentures of a financial market, they do not need the constant attention of fund managers. <\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n In Mutual Funds, since the priority is on making as much of the high-tide of prices, investment decisions are regularly made during trading hours.<\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n Being actively managed, fees for mutual funds are high. With less human intervention, the fee for managing Index Funds is lesser.<\/span><\/p>\n <\/p>\n Index Funds, like Exchange Traded Funds (ETFs), consist of a bunch of stocks instead of the stocks of individual companies. <\/span><\/p>\n The major difference between the two would be the risk factor.<\/span><\/p>\n Index funds have less risk associated than individual stocks and bonds. It would need the market to crash<\/a> completely for these funds to suffer severe losses.<\/span><\/p>\n And markets as we know, eventually recover in due time. Stocks, on the other hand, depend completely on the fate of the company invested in.<\/span><\/p>\n What are Index Funds?<\/span><\/h3>\n
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\n<\/span>How is this index calculated? <\/strong><\/p>\n
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\n<\/span> Very simply put, the market index of a stock market is the sum-total of the performance of all the companies in that particular stock market. <\/span>
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\n<\/span> An Index Fund has stocks and bonds that follow a particular index. <\/span><\/p>\n Index Funds Vs Mutual Funds<\/span><\/h3>\n
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\n<\/span> However, both differ in several ways :\u00a0<\/span><\/p>\n Investment Strategy<\/span><\/h5>\n
Passive Management <\/span><\/span><\/span><\/span><\/span><\/h5>\n
Expense Ratio
\n<\/span><\/h5>\n Index Funds Vs Stocks and Bonds<\/span><\/h3>\n