There are multiple ways to invest in the stock market, like investing in index funds. If you don’t want to spend time researching the market, picking stocks, index funds are an excellent investment option.
Index funds are mutual funds that invest in the underlying stocks of benchmark indices. The primary objective of an index fund is to generate the same returns as the index. There are several benefits of investing in index funds. We will discuss them with the best index fund of 2022 where you can invest.
As the name suggests, index funds invest in stocks that constitute the benchmark indices like NSE NIFTY and BSE SENSEX. Index fund investment is passive investing, where the investment portfolio includes the shares in the market index in the exact proportion and weightage to generate similar returns.
Diversification is a critical factor in an investment portfolio to reduce the risk element by investing in different sectors and companies. Index fund managers invest in the stocks from the market indicator and generate returns comparable to the index.
There are several key benefits of investing in index funds.
It is a passive mutual fund investment and follows the benchmark. It doesn’t need active market research. So, the cost of investing in index funds is low.
Index funds follow an automated, regulation-based investment method which eliminates scopes of emotional biases and judgemental errors.
Index funds invest in a diversified portfolio spread across sectors and companies. Funds following NSE NIFTY invest in fifty company stocks following the index.
Fund managers place few trades in a year, resulting in restricted capital gain. It leads to less capital gain tax.
Since these funds don’t require active management, index funds are easier to manage. The fund manager must only rebalance the fund as and when needed.
Let’s discuss some of the best index funds where you can invest. Please note that these funds are for reference purposes only. Do your research before investing.
The fund has an AUM of Rs 1863.92 crore and invests 99.6 percent of the fund in equities. The fund launched by UTI is a top-ranking NIFTY index fund in India.
It has a fund size of Rs 66.70 crore and invests 99.7 percent of the fund in equities. However, the smaller fund size means a higher expense ratio for investors. The fund seeks to provide returns before expenses that closely correspond to the underlying index’s returns.
The fund launched by Motilal Oswal Mutual Fund seeks to generate returns similar to the S&P BSE Low Volatility Total Return Index.
The SmallCap Index Fund generates returns corresponding to the returns managed by the securities represented in the NIFTY SmallCap 250 Index before expenses.
The returns generated by the fund closely correspond to the returns of the securities present in the CRISIL Gift 2028 index before expenses.
Know More About What is Expense Ratio in Mutual Funds?
These are the best index funds, 2022. Index funds replicate the returns of the major market indices and therefore are less risky than stock investment. If you want to perk your funds in a mutual fund that generates competitive returns without increasing risk exposure and doesn’t require active monitoring, index funds are better options. Invest in the best index funds with Angel One. Open your free Demat account today!
Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory
Published on: Aug 30, 2022, 4:17 PM IST
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