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Home / Mutual Funds

Mutual Funds

Indexes... 

The price movements of the Sensex or the Nifty is basically a proxy for the market and in some senses for the economy as a whole. Generally, indexes are used to get some information about a financial market. Financial indexes are constructed to measure the performance of stocks, bonds, commodities and other instruments. 

Financial indexes include the BSE Sensex and the NSE Nifty. For example, the BSE Sensex is an index constructed by taking an average of list of 30 scrips from the Bombay Stock Exchange. The Nifty index is similarly an average of prices from the list of 50 scrips from the National Stock Exchange.

...and Index Funds

An index fund invests all its funds in a portfolio that is a replication of the index. What it essentially means is that the index portfolio will consist of all stocks represented in the index and in the same proportion. Hence the returns of the funds are almost identical to what one would get from investing into a scrip whose price is the index or it is identical to investing into the basket of shares which constitutes the index.

An index fund is the only way an individual investor will be able to purchase a portfolio that consists of the index stocks. 100 shares of each stock represented in the Sensex might cost approximately Rs.16,86,650/- which would be beyond the reach of many an investor. 

An index fund is the best possible diversified portfolio as it has the cream of the stocks from different industries listed on the exchange. The index fund also helps an investor to own shares of blue-chip firms like HLL, Infosys and others which are very high priced. One can invest into a index fund for just Rs.5,000/-

Why invest in an index fund and not in a Growth or Sector fund? Click here to find out.

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