Reasons for choosing Index funds

Being a naïve investor it is always advisable to invest in the stock market through mutual funds. There are so many mutual fund options also available so it makes investors quite uncertain in which they should invest. In this article we will discuss Index mutual funds.

Learn the ins and outs of Index Funds so you can make educated investment decisions:-


Index funds are one way to gain access to the market’s potential for significant returns without taking on undue risk. Mutual funds known as “index funds” own solely the equities included in a given index e.g. Nifty50 constitute top 50 stock and funds which include all these stocks are known as Index funds and they keep on changing the stocks as and when nifty changes the stocks.

Index funds are a popular type of mutual fund that allows investors to reap the benefits of high returns with less exposure to market volatility. For the most part, an index fund’s holdings will mirror those of the index it tracks. You can invest in index funds through a systematic investment plan (SIP) using the House of Funds website or any app. The expense ratio of index funds is often rather low. Mutual funds can be purchased quickly and cheaply on this platform.

The term “passive funds” is also used to describe these. All of the fund’s holdings must match those of the index it follows. The index measures stock market performance using a weighted average composite score. This is determined by aggregating the market-representative prices of a subset of equities. Like India’s Sensex and India’s NIFTY.

The danger associated with index funds is not high.

Compared to actively managed funds, index funds are a safer option for investors seeking a medium-risk return. When compared to index funds, which track an underlying index and do not attempt to beat it, active funds take on additional risk. Everything is recorded.

The liquidity of index funds is lower than that of conventional funds since they are not traded on exchanges. Additionally, index funds have a low expense ratio. That means we can afford more of it because of this improvement.

Reasons why index funds are a good choice for your portfolio

Index funds may be a safer alternative for those who want to invest in stocks but are nervous about the market’s ups and downs.

  • Its returns are in line with the underlying index since its asset allocation mirrors that of the index.
  • The fund manager does not have to make any decisions about which equities to purchase or sell because the fund is passively managed. Because of this, one might have a favourable expense ratio on their investments.

The index funds might underperform some other mutual funds for a shorter period of time but when you keep your investments in index funds for longer durations up to 10-20 years then returns from index funds will almost match with the other mutual funds returns.

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