What are Index funds Index Funds are nothing but passive mutual funds that work by replicating popular market indices. The Fund manager invests in all the stocks that mimic the subsequent Index.
How do Index funds work?
According to the portfolio aligned with the Index, the fund manager buys or sells units according to the portfolio during any changes in the stock's weight within the Index. Although it is easier to follow passively managed funds, there is a limitation to this it may not always offer the same returns as that of the Index because of an error called tracking error and scheme expenses. Tracking error occurs due to disproportionate holdings of securities that align with the Index and transaction costs incurred.
Understanding Nifty Index Fund
Nifty Index funds are also a replica of Index funds. Nifty Index funds in India are those mutual funds that are a replica of the composition of nifty stock indices. So you may choose to invest in a set of handpicked instead of restricting yourself to a particular stock. The Nifty Index fund is a replica of the NSE Index, which is a benchmark
Hypothetically speaking, Nifty 50 has around 31% exposure to the Retail/FMCG Industry. Thus, Nifty Index funds that track Nifty 50 will also have 31% of its portfolio invested in the Retail/FMCG sector. The same stocks that are included in the benchmark Index are easier to track and analyze. Nifty Index funds gives you the best of both worlds with the benefit of Indexation and optimum use of marketization of stocks.
Benefits of Investing in Nifty Index funds in India
What are Exchange-traded funds (ETFs)
Exchange-traded fund (ETF) is a type of investment that can trade on an exchange like a stock, which means they can be bought and sold throughout the trading day. From traditional investments to tangible assets like commodities or currencies are offered by ETFs.
Let’s understand the types of ETFs:
There are a few types of ETFs like –
There are a few more ETFs in the market that can be classified based on strategy.
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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