Index funds are sub-type of mutual funds, and you can invest in a top index fund through an open-end fund called Index Funds. It is a passive way of investing in stock markets, also known as an index-tracked mutual fund, as it tracks the benchmark index. All the stocks present within the index have some weightage in the fund’s portfolio. These funds are passively managed and operate at minimum cost, offering potentially higher returns with minimum fees. Investing in index funds is a fantastic way to diversify your portfolio and achieve long-term growth. Index funds are simple, cost-efficient, and transparent investments that offer you the best return on your money.
Advantages of investing in the best index funds in India:
- Passively Managed.
- Low Expense Ratio and Low Fees.
- Free from Human Bias.
- Market Exposure.
- No prior investing experience is required.
- Tax Benefits.
- Easy to Manage.
- Provides Stable Returns.
Things to consider before investing in the best index funds:
- Investment Cost.
- Index Category
- Risk Factor.
- Potential Return.
- Investment Horizon.
- Your Financial Goals.
Who should invest in index funds?
The decision to invest in top index funds in India depends on your financial goals and risk tolerance. If you are looking for predictable returns and portfolio diversification, index fund investment is an excellent choice. You can invest in the Nifty or Sensex index fund if you desire to become a stock investor. Bearing minimum risk associated with actively managed equities, you can earn greater returns corresponding to the upside of index performance.
Top 10 Best Index Funds in India 2022:
- Navi Nifty 50 Index Fund: It is the least cost & passive way of investing in the top 50 companies in India. This fund simply doubles the returns of the Nifty 50 index. It gives better returns from Fixed Deposits over the long term. Best to invest over the long term of 5 years or more.
- Navi Nifty Midcap 150 Index Fund: It provides a low-cost option for investors to get exposure to the Nifty Midcap 150 Index. It consists of 150 companies (ranked 101-250) based on full market capitalization from the Nifty 500 Index. Invest if you want to double your returns of Nifty Midcap 150 TRI at a low cost. This fund is good for diversifying the risk if you have already invested in large-cap indices like Nifty 50 & Nifty Next 50.
- Navi US Total Stock Market Fund of Fund: It provides a low-cost option for investors to get exposure to the US equity market through the Vanguard Total Stock Market ETF (VTI). VTI tracks the CRSP US Total Stock Market index, which has 4000+ constituents across small, mid, and large-cap companies, representing 100% of the US investable equity market. Invest if you want to diversify your portfolio & have exposure to the US equity market at a low cost.
- UTI Nifty Next 50 Index Fund – Direct Plan-Growth: This fund is designed to provide capital appreciation and income through investments in equity and equity-related securities. This fund invests primarily in stocks of companies listed on the National Stock Exchange of India (NSE) with a focus on large-cap stocks. It also invests in other instruments, such as derivatives, money market instruments, debt securities, etc., which are considered suitable for incorporating in an investment portfolio.
- DSP Equal Nifty 50 Fund – Direct Plan-Growth: It is a diversified equity fund that invests in stocks of companies across sectors. It needs to be invested in stocks of companies (IT, technology, healthcare, and financial services) that are performing well and are expected to continue in the same way. This fund is benchmarked against the NIFTY 50 Equal Weight Total Return Index.
- IDBI Nifty Junior Index Fund Direct Plan-Growth: This is a mutual fund that invests in stocks of companies that are part of the Nifty Junior Index. It is performing well giving and has given investors a return of over 8.64% in the last year. The expense ratio of this fund is 0.32%, and it is benchmarked against the NIFTY Next 50 Total Return Index.
- ICICI Prudential Nifty Next 50 Index Fund – Direct Plan-Growth: It is a diversified equity fund that invests in stocks of companies from the Nifty Next 50 index. The Current Net Asset Value of this fund stands at Rs 34.1935. The expense ratio of this fund is 0.3%, and it is benchmarked against the NIFTY Next 50 Total Return Index.
- Axis Nifty Next 50 Index Fund Direct-Growth: It is a type of Mutual Fund sub-type launched by Axis Mutual Fund and is a Top Nifty 50 Index Fund of India. This fund seeks to provide returns before expenses that closely correspond to the total returns of the Nifty 50 Index Fund subject to tracking errors.
- Nippon India Nifty SmallCap 250 Index Fund Direct-Growth: It is a Mutual Fund sub-type launched by Nippon India Mutual Fund. This fund seeks to provide investment returns closely corresponding to the total returns of the securities as represented by the Nifty SmallCap 250 Index before expenses, subject to tracking errors.
- SBI Nifty Index Fund: This fund follows a passive investing strategy. The funds primarily invest in equities that make up the NIFTY 50 Index in the same proportion as the index to obtain similar returns by reducing the performance gap between the index and the scheme. It is a type of Mutual Fund sub-type launched and managed by SBI Funds Management Private Limited. It is moderately a high-risk fund; it has returned 14.7% CAGR (Compound Annual Growth Gate) since its inception.
The Indian stock market can be challenging for you to understand. As there are thousands of stocks, a variety of financial instruments, and confusing terms around it, investing in stocks seems like a complex process. But it is also easy to get attracted to the strong world of daily trading, where you buy and sell stocks every day and try to make huge gains by speculating on short-term price movements. However, if you are vigilant about taking risks and want to invest for the long term with higher returns and with the benefits of best-performing index funds, it might be the right choice for you.