Index Fund
A mutual fund that tracks a market index like Nifty 50.
What does it mean? (Simple)
An index fund is a type of mutual fund that simply copies a market index (like Nifty 50 or Sensex) instead of trying to beat it.
Because there's no active stock-picking, index funds have very low fees (expense ratio of 0.1% to 0.5%). Over the long term, most actively managed funds fail to beat index funds after fees.
Index funds are ideal for long-term investing (5+ years) and are recommended by many financial experts for beginners.
Example with ₹ numbers
A Nifty 50 index fund owns shares of all 50 companies in the Nifty 50. If Nifty goes up 12%, your investment also goes up approximately 12%.
Common mistakes to avoid
- ⚠️Expecting to beat the market (index funds match it)
- ⚠️Choosing high-expense index funds (compare expense ratios)
- ⚠️Investing for short term (equity is volatile)
Related terms
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⚠️ Educational only: This explanation is for learning purposes. Please consult a financial advisor for personalized advice.