Investing in Mutual Funds might feel confusing if you do not know where to start. Presenting Index Funds, a low-cost & easy to understand investment option to begin your mutual fund investment journey.Index Funds invest in a wide variety of indices such as the Nifty, Sensex, and more, to track the performance of a specific basket of stocks from a particular market.
Thus, when you invest in an Index Fund, your portfolio is able to benefit from favourable market performances. So, whether you're new to mutual funds or an existing investor, Index Funds could be the right pick for you.
An index fund is a mutual fund that imitates stock market indices such as Sensex, Nifty, and others. A market index tracks the performance of a specific basket of stocks that represent a particular market or economic sector. Sensex carries a list of 30 top-performing companies, while Nifty 50 holds the top 50 companies with the largest market capitalisations. The index funds that mirror these indices also invest in the same companies that are a part of these indices.
Hence, when Sensex or Nifty performs well, the index fund simultaneously provides similar returns. The objective of investing in an index fund is to provide investors with exposure to the broader market rather than trying to beat it through active stock picking. Index funds can be a goldmine of stock picking since they invest in financially sound companies of the index.
Index funds are mutual funds where a fund manager invests in the stocks included in the target index in the same proportion as the index. By investing in an index fund, investors can benefit from the market's long-term performance while avoiding the risks and costs associated with active fund management. Additionally, index funds are typically low-cost and offer the advantage of automatic diversification, which helps to reduce the overall risk in an investment portfolio.
Index funds typically have low management fees and expenses compared to actively managed funds, which can result in higher returns over the long run.
Index funds provide automatic diversification, as they hold many stocks, which helps reduce the portfolio's overall risk.
Investing in index funds is simple, as they follow a set benchmark and do not require extensive research or analysis.
Index funds provide investors with exposure to a broad market rather than just a few individual stocks, which can result in less volatility and better long-term performance.
While index funds can be a good investment option for many individuals, they still carry market risk, and it is important to consider your overall financial goals and risk tolerance before making any investment decisions.
This publication is pursuant to Investor Awareness Initiative by Motilal Oswal Mutual Fund. This shall not be construed as offer to invest in any financial product or Scheme. The objective of this publication is restricted to informational purposes only.
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