Investing in Index Funds

Investing in Index Funds
Investing in stocks is time consuming and requires detailed analysis of the business and management.
If one doesn’t have the knowledge or the right skill sets, or the required time to put into studying this, one can still make money in the market
Cheat Code: Index ETFs or Index Funds
An index fund is an investment fund within the mutual fund family designed to track and mirror key benchmark indexes like the Nifty 50 or the Nifty next 50, index funds are designed as passive funds that automatically track an underlying index.
Index investing basically deploys your funds into the companies that are listed in the index and with the same weightage as in the index.
As and when the index is rebalanced (weeding out the losers and adding the winners), the index ETF and Funds also gets rebalanced accordingly.
https://www1.nseindia.com/products/content/equities/indices/index_funds.htm
Since no one can time the market, SIP’s is the solution: SIP in Index Fund.
However patience is the key just like with your usual MF, investing is suitable for people having a horizon of 10 years or more.
And while mutual funds are often more actively managed, index funds are generally passive, given that they are automatically investing in stocks on the index they are tracking. Still, you'll be paying a fee - the expense ratio - which, for index funds, is typically to the tune of around 0.2%, as against the regular expense ratio of 2% which is paid annually.
Further due to these transaction costs and high churn , most of the active fund managers fail to beat the index.
Remember next time you take advice on investing from your panwala, or dhobiwala, or your dog, better to ignore that advice and simply follow the easy route of SIPs in Index funds.
The index funds track the performance of the index which is set as a benchmark, so define which index you are interested in is it Nifty 50 or mid and small cap.
On the other hand, ETFs are mutual funds which acts like a stocks and are traded on the secondary market of stock exchanges, hence makes sense for investors who would want to directly into ETFs rather than via Fund. ETFs just like shares, offers tick by tick rates when the stock market is open, whereas Index Funds publishes their NAV’s at the end of the day.

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