What is index fundand how does it work for beginner's step by step guide
What is index fund ?
Two stock exchanges of India i.e. Bombay Stock Exchange (BSC) and National Stock Exchange (NSC) can find out the condition of the market by looking at the indices of these two stock exchanges, these indexes only tell in which direction the market is going BSC. The index of BSC is called Sensex and the index of NSE is called Nifty.
The top 30 companies that have the highest market cap are included in the Sensex index and the top 50 companies that have the highest market cap are included in the Nifty index.
When you invest in an index fund, your money is invested in all the top companies of the index according to the weightage
The good thing about index funds is that Anyone can invest in index funds, especially those who do not know anything about mutual funds and the stock market
Index funds give an average return of 14 to 15 percent and in the last 40 years, the Sensex has given an average return of 17 percent CACR
The risk in index funds is moderately high, so give your investment minimum of 5 to 7 years, SIP is the best way to invest in index funds.
History of index fund
The world's first index fund was launched in 1996 by a US-based asset management company qualidex fund.And as a matter of fact, this index fund was not created for the public,
who did index investing become popular ?
The index fund was made famous all over the world by John C bogle, who was America's most legendary investor at that time, he created the first index fund for the public in August 1976. we know it today as Vanguard index fund
John Bogle index funds
John C bogle believed that no mutual fund can give high returns in the stock market in the long run, that's why he said that it is much better than normal mutual funds that we invest directly in index funds
because short term Even though Mutual Funds may give better returns than Index Funds, but in the long term, Index Funds can give better returns than Mutual Funds, although initially many investors made fun of John C bogle on these things, but gradually this thing is understood by all the investors. and gradually many people started investing in Vanguard index fund and today Vanguard is the second largest mutual fund company in the world.
How does an index fund work ?
Usually there are two index funds in India, Sensex and Nifty,
Sensex is made up of 30 companies i.e. if we invest in Sensex index fund then our invested money will be invested in these 30 companies by weight and If a new company is added to the then our Sensex Index Fund will buy the shares of that company and if a company is out of the Sensex then the Index Fund will sell the shares of that company.And over time, the percentage of the Sensex index will go up or down, the percentage gain will be
The same Nifty consists of 50 companies, that's why our money invested in Nifty Index Fund is invested in 50 companies of Nifty. according to the weightage of companies. And over time, the percentage of the nifty index will go up or down, the percentage gain will be
How do beginners invest in index funds?
There are mainly 2 ways to invest in index funds,
The first (ETF) i.e. exchange traded fund. You need to have a demat account to invest through ETFs. You can open Demat account from any stockbroker app, some stockbroker apps are named like zerodha, upstox, 5paisa, Angel Broking etc. Keep in mind that all these stock broker apps charge different And there is also an annual maintenance charge for the demat account.
The second and easiest way is to go to the website of the mutual fund house and buy an index fund. For this you have to fill only your required details.
Apart from this, you can also invest in index funds from the Grow app.
What did Warren Buffett say about index funds
Friends, the world's biggest investor, Warren Buffett also recommends investing in index funds and he says that many people should invest in S&P 500 index funds
Top 5 best index fund in 2021
Friends, there are many index funds which give good returns, but according to today, the best 5 index funds are
1. CIC Prudential Nifty index growth direct plan
2. UTI Nifty index growth direct plan
3. HDFC index Nifty 50 growth direct plan
4. Tata index Nifty growth direct plan
