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What are Index Funds?
If you are looking for passive investing solutions, then Index funds can be a suitable option for you. Index Funds are Mutual funds which track a specific index. Indices are of various types. Some of them in India are SENSEX, Nifty 50, Nifty 500, Nifty Smallcap 250, Nifty Midcap 150 etc. Investing in Index Funds has a lot of advantages like convenience and low costs among others.
How does an Index Fund work?
Investor
Index Return*
As we can see from the above, an Index Fund invests in the same securities as that of the Index it tracks in the same weightage. The endeavor therefore is to deliver returns that closely correspond to that of the index.
Benefits of Investing in Index Fund
Diversification
Index funds invest in the same securities as that of the Index, thus giving you the advantage of diversification across all sectors
Liquidity
Index Funds being open-ended in nature offers ample liquidity
Hassle free
Offers simplification in investments as it reduces the stress of individual stock selection.
Transparency
Index funds track a specific Index and endeavors to provide returns which closely correspond to that of the index.
SBI S&P BSE Sensex Index Fund
An open-ended scheme tracking S&P BSE Sensex Index
May 18, 2023
May 24, 2023
S&P BSE Sensex TRI
Rs. 5000
Fund Manager - Mr. Raviprakash Sharma
Why should you Invest?
First Time Investor
If you are a new investor and want to invest in direct equities, then selecting the right stocks and tracking them can be a challenge. A passive equity fund can be a suitable solution as it can help you avoid any fund manager bias.
Tactical Allocation
If you want to take a tactical view on a certain segment of the market, passive funds offer an investment opportunity which is also very liquid!
Diversification
Passive index funds can be optimally used for creating a diversified investment portfolio
