Index funds -Who can opt for these funds?

These funds are ideal for first time equity or mutual fund investors who do not wish to actively participate in fund management. But indeed there is some risk associated with being attached to equity and hence you surely need to have some or moderate risk appetite to stomach any sort of huge diversion.

To understand index fund-the fund’s allocation to a particular stock is in sync with its allocation in the index. Here there is no say of the fund manager neither with respect to the stock selection or the % that has to be allotted to them.

What to note when selecting index funds?

So, when going on to choose index funds for your long term wealth creation objective, be mindful of the tracking error that is the difference between the fund’s return and the index return. The lower that difference is better shall be your fund choice.

Index fund	Rating	Expense ratio	1-year return	3-year return	5-year return
UTI Nifty Index Fund	CRSIL 4-Star rated	0.20%	25.30%	18.18%	17.86%
HDFC Index Sensex Fund	Value Research 4-Star	0.20%	22.88%	18.18%	17.86%
Tata Index Fund-Sensex	Value Research 4-Star	0.29%	22.05%	18.02%	17.75%
Nippon India Index Fund-Sensex	Value Research 4-Star	0.15%	22.85%	18.25%	17.86%

Note:

All of the above plans are direct plans that do not involve an intermediary and hence because of the fund and likewise the dealing, expense ratio is low, which in the long run means high savings and hence high returns.

Disclaimer:

Mutual Fund investments are risky and investors are advised to invest only if they are able to take losses. Neither the author, nor Greynium Information Technologies would be responsible for any losses incurred based on the above article.