Why Passive Funds?

Risk

Index Funds Eliminates fund manager risk and therefore the risk of underperforming the benchmark

Long-term

Fund managers change the stocks frequently. An investor who is looking to invest for over 10 years+ is better suited for index funds

Transparency

As indices are pre-defined, investors know the sector, companies and proportion in which their money will be invested

Low Costs

Since index funds are passively managed, cost are kept relatively low

Diversification

Generally tracks broad based indices thus reducing the impact of decline in value of any one stock or industry, sector

Our Index Funds

Index Funds vs ETF - Major Differences

FeaturesExchange Traded Fund (ETFs)Index Fund
FeaturesExchange Traded Fund (ETFs)Index Fund
Net Assets Value (NAV)Real TimeEnd of the day
Liquidity ProviderAuthorised Participants (APs) on stock exchange + Fund itselfOnly by Fund
Portfolio DisclosureDailyMonthly
Intraday TradingPossible if investor has required inventory of unitsNot Possible
Cost EffectivenessEach investor bears their own transaction costTransaction costs are spread across the fund
Holding FormatCompulsory in Demat formPhysical + Demat
Investment DecisionCan be bought / sold anytime during market hours at prices that are expected to be close to actual NAV of the Scheme. Thus, investor invests at real-time prices as opposed to end of day prices.Not applicable

@ In case of ETFs, the Scheme offers units for subscription/ redemption directly with the Mutual Fund subject to minimum lot size of units which are generally high amounts. Investor can buy/ sell ETF any units in cash segment on secondary market of exchanges where it is listed in multiple of 1unit.

Still have some questions about Index Funds?

What are the different types of Mutual funds?

On the basis of Objective

 

A. Equity Funds/ Growth Funds

Funds that invest in equity shares are called equity funds. They carry the principal objective of capital appreciation of the investment over the medium to long-term. The returns in such funds are volatile since they are directly linked to the stock markets. They are best suited for investors who are seeking capital appreciation. There are different types of equity funds such as Diversified funds, Sector specific funds and Index based funds.

 

B. Diversified funds

These funds invest in companies spread across sectors. These funds are generally meant for risk-taking investors who are not bullish about any particular sector.

 

C. Sector funds

These funds invest primarily in equity shares of companies in a particular business sector or industry. These funds are targeted at investors who are extremely bullish about a particular sector.

 

D. Index funds

These funds-invest in the same pattern as popular market indices like CNX Nifty Index and BSE Index. The value of the index fund varies in proportion to the benchmark index.

 

E. Tax Saving Funds

These funds offer tax benefits to investors under the Income Tax Act.Opportunities provided under this scheme are in the form of tax rebates u/s 88, saving in Capital Gains u/s 54EA and 54EB and deductions u/s 80C. They are best suited for investors seeking tax concessions.

 

F. Debt / Income Funds

These Funds invest predominantly in high-rated fixed-income-bearing instruments like bonds, debentures, government securities, commercial paper and other money market instruments. They are best suited for the medium to long-term investors who are averse to risk and seek capital preservation. They provide regular income and safety to the investor.

 

G. Liquid Funds / Money Market Funds

These funds invest in highly liquid money market instruments. The period of investment could be as short as a day. They provide easy liquidity. They have emerged as an alternative for savings and short-term fixed deposit accounts with comparatively higher returns. These funds are ideal for Corporates, institutional investors and business houses who invest their funds for very short periods.

 

H. Gilt Funds

These funds invest in Central and State Government securities. Since they are Government backed bonds they give a secured return and also ensure safety of the principal amount. They are best suited for the medium to long-term investors who are averse to risk.

 

I. Balanced Funds

These funds invest both in equity shares and fixed-income-bearing instruments(debt) in prescribed proportion. They provide a steady return and reduce the volatility of the fund while providing some upside for capital appreciation. They are ideal for medium- to long-term investors willing to take moderate risks.

What is NAV?

NAV is the net asset value of the fund. In simpler words it reflects what the unit held by an investor is worth at current market prices.

What are the types of returns one can expect from a Mutual Fund?

Mutual Funds give returns in two ways - Capital Appreciation or Dividend Distribution.

 

A. Capital Appreciation : An increase in the value of the units of the fund is known as capital appreciation. As the value of individual securities in the fund increases, the fund`s unit price increases. An investor can book a profit by selling the units at prices higher than the price at which he bought the units.

 

B. Dividend Distribution: The profit earned by the fund is distributed among unit holders in the form of dividends. Dividend distribution again is of two types. It can either be re-invested in the fund or can be on paid to the investor.

How do I track the performance of the Fund?

The NAVs are published in financial newspapers and also available on the AMFI website on a daily basis.