This investment is not that much well known in India but as Indian market has becoming the mature so index fund investment has started in India.
Index fund is passive fund as this fund is actively managed. As here we can invest in various indices such as nifty, sensex and many more.. As investing in the nifty, sensex. indices means investing in the companies which are listed in their respective index. Nifty index is made of 50 companies. In india the index fund is not as popular as US and other companies.
Top weightage company –
HDFC Bank. 10.37%
Reliance IND.LTD. 7.52%
Housing department finance. 7.26%
ICICI bank.LTD. 4.35%
Kotak Mahindra bank. 4.21%
Tata consultancy service. 4.10%
Larson & Toubro.LTD. 4.00%
Hindustan Unilever.Ltd. 2.72%
Note: National stock exchange select the top Indian companies on the basis
- Market capitalization.
- Average weight.
Sensex is made of 30 companies.
How it works:
Investing in index fund means investing in sensex and nifty. If you invest 2000 in index nifty fifty means that amount will be divided into top companies of nifty as per their weightage. Here the return will be depends upon the index fluctuation. As the total return will be as per the invested amount in companies according ti their weight. If the index goes up then return will be more if index goes down then index will be less.
Expenses ratio 0.2-1%.
Low risk and no study.
Simple to understand.
Lack of flexibility.
No big gain.
Practically investment :
If we want to invest in index fund then we can invest in two ways i. e mutual fund :
ETF – Exchange trade fund.
If any one has no knowledge about the share investment then they can refer to Invest in ETF as here you directly invest im index of nifty or sensex whichever you want. As you can buy through online just like a share. Here you can predect the return according to the indices. If the induces rise then the return will rise or if it falls the return also falls. The main problem of this investment is that here you will face difficulties for liquidation. As in india this type of investment is very less. So you may not find buyers or sellers easily. You can buy from Groww, kuvera, paytm money or AMC.
Index mutual funds:-
The index mutual fund means here you have to just pay the money and the respective manager will invest in different indices.
You can do in the case if you don’t want to give time for reserch. As the mutual fund companies collect the money from investor and invest accordingly their portfolio and give you a good return. The main advantage of this investment is that here you will not face the liquidation problem. Here you can redeem your invested money whenever you required. This is because this mutual fund companies keep some amount of money on cash for liquidation.
While investing in index mutua fund take care that their expenses ratio is not so high and also check that how much amount this companies keep in cash for liquidation as of they keeo more then they will invest less and indirectly you will get low returns.
Some of the index mutual fund.
SBI index fund:
As they will invest in the companies listed in respective indices. The total return will equivalent to the total return indices.
Expense ratio – 0.69%
Minimum investment – rs 5000
Minimum additional investment – rs 1000
Minimum SIP – rs 500.
Minimum installment- rs 12
Minimum withdrawal – rs 1500
Exit within 15 days.
1 year- 14.98%
5 year- 7.7%.
HDFC index fund –
Minimum investment – rs 5000
Maximum additional investment – rs. 1000
Minimum SIP- rs 500 for 12 month
Minimum withdrawal – rs 500 Exit within 3 days.
1 year – 16.13 %.
3 year-16.69 %.
5 year- 8.35%.
As this investment is not so popular but if you make investment with your research then you can definitely make profits. This type of investment is more likely made in foreign countries.