Who should invest in index funds?
Index funds are suited for passive investors, i.e. investors who are looking to build long-term wealth but:
- Don’t have time to manage their portfolio
- Want to stay away from constant monitoring and juggling their mutual fund portfolio.
- Are skeptical about active fund manager’s long-term efficiency to generate returns above the
benchmark index.
- For an investment horizon of 10+ years – index funds remain the most efficient mutual fund.
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Why should you invest in index funds?
Low Cost: Since index funds are passively managed, the total expense ratio (TER) is very less as compared to the actively managed ones. While an actively managed fund may charge you anything between 1-2% as TER, an index fund would typically charge ...
Why are index funds popular in other parts of the world?
Index funds are considered as ideal for constructing a core portfolio for long term wealth creation due to their diversification benefits, low cost and low portfolio churn. Globally, Index funds are popular due to the following reasons – Easy - Index ...
Are all index funds the same?
All index funds are not same because different index funds track different indices. But the philosophy behind investing remains the same. There are different types of indices in India: Benchmark indices like BSE Sensex and NSE Nifty Sectoral indices ...
Why should you not invest in index funds?
Index funds are built to replicate the index and most active fund managers charge fees to outperform indexes. Therefore, an investor who is purely looking to do better than the index should not invest in index funds. It’s important to point out that ...
Can I lose money investing in index funds?
Like in all mutual funds – there is always risk of losing money in the short-run. An index losing 1% daily will lead to the index fund’s value falling by 1%. However, over the long-run index funds have delivered healthy returns.