Will index funds be helpful in beating inflation?

Index funds do tend to beat inflation in the long term horizon.

How do index mutual funds work?

Portfolio of an index fund mirrors that of the underlying index, meaning that each stock is given the same weight in the portfolio as in the index.

What is the lock in period for index mutual funds?

There is no lock-in period for index funds. One can withdraw the funds anytime. However, exit load may be charged if you are selling within the exit load period (usually 365 days).

Are index funds better than FD?

Returns: In terms of returns, index funds do tend to outperform FDs in the long term. Risk: Index funds do provide better returns, however the risk involved is also higher than a FD.

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Index Funds

Q: What are index funds?

Index funds are based on an underlying index like Nifty, Nifty Midcap etc. They attempt to replicate the return and risk profile of the index on which they are based.

Q: How to invest in index funds online?

You can register on the INDmoney app. With no paperwork and complete digital process, you can become investment ready within minutes. You can select any index funds from our extensive catalogue.

Q: How are index funds in India taxed?

Short-term capital gains (within a holding period of one year) are taxed at a rate of 15%, irrespective of your income tax bracket. Long-term capital gains (after a holding period of one year or more) upto Rs 1 lakh a year are tax-exempt. Any long-term capital gains exceeding this limit attracts LTCG tax at the rate of 10% (with applicable cess).

Q: Can index mutual funds pay dividends?

Yes, many index funds do offer a dividend payout plan.

Q: How to choose the correct index funds to invest in?

Investors should choose index Funds with the Lowest Expense Ratios. Expense ratio is the annual fee that the fund houses charge to manage your funds. Since index funds track the same indexes, the return is almost similar, thus investors should look at the expense ratio of the fund.

Q: What are the risks involved in investing in index funds?

Index Funds are usually less risky than actively managed equity funds. However, it is important to note that they do not protect you from market volatility. The degree of risk also varies according to the underlying index. For example: A large cap index fund will be less risky than a small cap index fund

Q: How long should I remain invested in index funds?

Investors should have a long term horizon of at least 3-5 years.

Q: Where do index mutual funds invest?

Index funds replicate the performance of indexes like Nifty, Nifty Midcap etc. Hence, their holdings will be identical to the holdings of the index.

Q: How much money should I invest in index funds?

The ideal allocation to index funds depends on your risk profile. An aggressive investor should have a lower allocation to index funds as compared to a relatively conservative investor.

Q: What are the expected returns of index funds in India?

The returns depend on the index being tracked. Large cap indexes may deliver returns in the range of 10-12%, while mid cap and small cap indexes may give relatively higher returns. However, these returns are not guaranteed.

Index funds are a low-cost way to invest in a diversified portfolio of stocks that track the performance of a specific market index, such as the Nifty 50 or Sensex. By investing in an index fund, investors can gain exposure to the overall market without having to buy individual stocks themselves.

Know more about Index Funds

Best Index Funds

3 Yr Returns

20% - 22%

Nifty 50

3 Yr Returns

21% - 23%

Nifty Next 50

3 Yr Returns

19% - 21%

Nifty Midcap

3 Yr Returns

24% - 26%

Nifty Smallcap

3 Yr Returns

30% - 31%

Global/US

3 Yr Returns

12% - 14%

Others

3 Yr Returns

21% - 23%

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Insights on Best Index Funds

Performance vs. Nifty Next 50 Index and Nifty Midcap Index Funds

Category	1Y	3Y	5Y
Nifty 50 Index Funds	+14.86%	+21.43%	+12.45%
Nifty Next 50 Index Funds	+5.08%	+19.79%	+10.24%
Nifty Midcap Index Funds	+28.02%	+33.43%	+19.0%

In the last 1 year, nifty 50 index funds have outperformed nifty next 50 index funds by 9.80% and underperformed nifty midcap index funds by 13.20%
In the last 3 years, nifty 50 index funds have outperformed nifty next 50 index funds by 1.60% and underperformed nifty midcap index funds by 12.00%
In the last 5 years, nifty 50 index funds have outperformed nifty next 50 index funds by 2.20% and underperformed nifty midcap index funds by 6.60%

Top Nifty Index Funds by Net Inflow

Fund	3M Change	6M Change	Current AUM
UTI Nifty 50 Index Fund-Growth Option- Direct	₹1026.5 Cr	₹2617.2 Cr	₹12092.5 Cr
HDFC Index Fund Nifty 50 Plan-Direct Plan	₹796.1 Cr	₹1988.9 Cr	₹9446.3 Cr
SBI Nifty Index Fund Direct Growth	₹435.0 Cr	₹1589.0 Cr	₹4862.7 Cr

UTI Nifty 50 Index Fund-Growth Option- Direct has seen net inflow of ₹2617.2 Cr in the last 6 months in the nifty index funds category
HDFC Index Fund Nifty 50 Plan-Direct Plan has seen net inflow of ₹1988.9 Cr in the last 6 months in the nifty index funds category
SBI Nifty Index Fund Direct Growth has seen net inflow of ₹1589.0 Cr in the last 6 months in the nifty index funds category

Top Holdings of Nifty Index Funds

Holdings	# of Funds	Total Investment Value
Axis Bank Ltd	39 out of 71 nifty index funds	₹1618.75Cr
HCL Technologies Ltd	36 out of 71 nifty index funds	₹721.85Cr
Infosys Ltd	36 out of 71 nifty index funds	₹2854.89Cr

Axis Bank Ltd is held by 39 out of 71 mutual funds in the nifty index funds category, with a total investment value of ₹1618.75Cr
HCL Technologies Ltd is held by 36 out of 71 mutual funds in the nifty index funds category, with a total investment value of ₹721.85Cr
Infosys Ltd is held by 36 out of 71 mutual funds in the nifty index funds category, with a total investment value of ₹2854.89Cr

Top New Holdings Added by Nifty Index Funds

Holdings	# of Funds	Total Investment Value
Jio Financial Services Ltd	2 out of 71 nifty index funds	₹4.51Cr
Jindal Steel & Power Ltd	1 out of 71 nifty index funds	₹7.53Cr
LTIMindtree Ltd	1 out of 71 nifty index funds	₹2.99Cr

In the last 6 months, Jio Financial Services Ltd stock has been added by 2 out of 71 mutual funds in the nifty index funds category, with a total investment value of ₹4.51Cr
In the last 6 months, Jindal Steel & Power Ltd stock has been added by 1 out of 71 mutual funds in the nifty index funds category, with a total investment value of ₹7.53Cr
In the last 6 months, LTIMindtree Ltd stock has been added by 1 out of 71 mutual funds in the nifty index funds category, with a total investment value of ₹2.99Cr

Top Holdings where Nifty Index Funds increased investment

Holdings	# of Funds	Total Investment Value
Tata Consultancy Services Ltd	5 out of 71 nifty index funds	₹55.75Cr
Asian Paints Ltd	4 out of 71 nifty index funds	₹28.55Cr
Hindustan Unilever Ltd	4 out of 71 nifty index funds	₹2.64Cr

In the last 6 Months, Tata Consultancy Services Ltd stock has been added by 5 out of 71 mutual funds in the nifty index funds category, with a total investment value of ₹55.75Cr
In the last 6 Months, Asian Paints Ltd stock has been added by 4 out of 71 mutual funds in the nifty index funds category, with a total investment value of ₹28.55Cr
In the last 6 Months, Hindustan Unilever Ltd stock has been added by 4 out of 71 mutual funds in the nifty index funds category, with a total investment value of ₹2.64Cr

What are Index Funds?

Index funds are a type of mutual fund that allows investors to passively invest in the stock market by tracking a particular market index. They invest in the same proportion of stocks as the underlying index, and are therefore able to offer potentially higher returns due to their lower fees. In essence, index funds are a low-cost and convenient way for investors to gain exposure to the overall stock market.

Advantages of investing in best index mutual funds

Investing in the best index mutual funds can be a smart and cost-effective way to build a diversified investment portfolio. It eliminates the need for active management, reduces costs, and provides exposure to a broad segment of the market while eliminating human bias.

Passive Investment Strategy

Index funds are passively managed, which means they track an underlying index and dont try to outperform it. This makes them ideal for most investors who want a hassle-free investment option.

Lower Costs

Index mutual funds have a lower expense ratio compared to actively managed funds because they dont require active trading or research teams. This means more returns for investors in the long term.

Elimination of Human Bias

In an index fund, the fund manager follows the benchmark index, and thus human discretion in investment decisions is eliminated. Humans can make errors in judgement. On the other hand, index is free from human biases, follows an automated approach, and does not require consistent tracking.

Diversification

Index funds provide exposure to a broad segment of the market, covering key sectors of the economy. This allows investors to diversify their portfolios and reduce risk.

Things to consider before investing in the best index funds 2023

investing in the best index funds can be a smart choice for investors looking for a diversified and cost-efficient investment option. However, its important to consider risk management, performance potential, and investment horizon before making an investment decision.

Cost Efficiency

Consider the expense ratio of the fund as a crucial factor when selecting an index fund. Lower expense ratios mean higher returns.

Risk Management

While index funds provide attractive returns, they are not immune to market risks. Hence, diversify your portfolio with a mix of active and index funds to mitigate risks.

Performance Potential

Check the tracking error of the index fund, which indicates the deviation of the funds returns from the indexs returns. Lower tracking error means better fund performance.

Investment Horizon

Index funds are well-suited for long-term investors, as they provide consistent returns over time.

Financial Goals

Every investor has a financial goal to fulfill. Index funds are best suited for individuals planning for retirement or wealth creation for a long-term goal like child education or marriage.

How to start investing online in the best index funds?

STEP 1

Download the INDmoney App

STEP 2

Create your profile

STEP 3

Select any best index fund from our catalogue

STEP 4

Choose between Starting a SIP or One time lumpsum

STEP 5

Complete the payment process

Types of Best Index Funds

There are various types of Index funds that are tracking the Nifty 50 Index, Nifty Mid Cap, Sensex, Nifty Small Cap, and Global indices. Mutual Fund companies such as SBI Mutual Funds, HDFC Mutual Funds, and ICICI Prudential Mutual Fund along with 30 others have more than 70+ Index Funds active in India.

There are 2 types of Index Fund plans: Direct index funds plan and Regular index funds plan. Direct index funds typically have lower expense ratios compared to regular index funds as there is no need for a fund manager to manage the portfolio

Why Should you invest in Index Funds?

If you are considering investing in the Indian stock market, index funds are an investment option you should definitely consider. Not only do they offer instant diversification, but they are also low-cost and offer long-term growth potential. In this article, well explore who should invest in index funds in India and why.

Firstly, index funds are an excellent investment option for new investors who are just starting out. By investing in an index fund, you gain exposure to a broad range of stocks without having to worry about picking individual stocks or keeping track of market fluctuations. This makes index funds a great way to start investing without needing a lot of knowledge or experience.

Secondly, index funds are an excellent investment option for long-term investors who are looking to build wealth over time. While index funds may not provide the same level of potential returns as individual stocks, they are a more stable and reliable investment option. Over the long term, index funds have historically provided solid returns that have outperformed many actively managed funds.

Thirdly, index funds are an excellent investment option for investors who are looking for low-cost investment options. Index funds typically have lower expense ratios compared to actively managed funds, which means that investors can keep more of their investment returns. This makes index funds an attractive option for investors who are looking to build a diversified portfolio while keeping costs low.

Taxation on Index Funds:

When investing in equity or debt index funds, its important to understand the tax implications on the capital gains earned upon redemption of your units.

For equity index funds, the rate of tax depends on the holding period. If you hold the units for up to one year, any capital gains earned will be considered Short Term Capital Gain (STCG) and will be taxed at a rate of 15%. If you hold the units for more than one year, any capital gains earned will be considered Long Term Capital Gain (LTCG). However, LTCG up to Rs. 1 lakh is not taxable, while any LTCG above this amount is taxed at a rate of 10% without any indexation benefits.

Similarly, for debt index funds, the tax treatment is also dependent on the holding period. If you hold the units for up to three years, any capital gains earned will be considered Short Term Capital Gain (STCG) and will be added to your taxable income and taxed at your applicable tax slab rate. If you hold the units for more than three years, any capital gains earned will be considered Long Term Capital Gain (LTCG) and will be taxed at a rate of 20% with the benefit of indexation.

Limitations of Index Funds

Limited flexibility: Index funds track a specific market index. This limits their ability to generate alpha or outperforming the market.
No downside protection: Index funds provide no protection against market downturns or declines in individual stocks within these funds.
Limited diversification: Index funds invest in a limited number of stocks that are present in the relevant index. This results in reduced diversification benefits.
Low dividend yield: Index funds may have a low dividend yield compared to actively managed funds.
Limited exposure: Index funds may not invest in all sectors or industries, limiting exposure to certain segments of the market. This is because its mandate is to invest in a certain specific index.

Index Funds

Index Funds Calculator

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Insights on Best Index Funds

Performance vs. Nifty Next 50 Index and Nifty Midcap Index Funds

Top Nifty Index Funds by Net Inflow

Top Holdings of Nifty Index Funds

Top New Holdings Added by Nifty Index Funds

Top Holdings where Nifty Index Funds increased investment

What are Index Funds?

Advantages of investing in best index mutual funds

Passive Investment Strategy

Lower Costs

Elimination of Human Bias

Diversification

Things to consider before investing in the best index funds 2023

Cost Efficiency

Risk Management

Performance Potential

Investment Horizon

Financial Goals

How to start investing online in the best index funds?

Types of Best Index Funds

Why Should you invest in Index Funds?

Taxation on Index Funds:

Most Popular Comparisons

Limitations of Index Funds

What are index funds?

How to invest in index funds online?

How are index funds in India taxed?

Can index mutual funds pay dividends?

How to choose the correct index funds to invest in?

What are the risks involved in investing in index funds?

How long should I remain invested in index funds?

Where do index mutual funds invest?

How much money should I invest in index funds?

What are the expected returns of index funds in India?