top index funds

Index funds are a type of mutual funds which invest in a particular Index. Like a Sensex Plan would invest in the Sensex while a Nifty 50 Plan would invest in the Nifty index.
Unlike other Equity mutual funds where a fund manager buys & sells stocks in the portfolio, Index funds follow a benchmark and buy stocks in a similar proportion as that of the benchmark like Sensex or Nifty 50. Therefore, they are known as Passive Funds whereby their returns are similar to their benchmark.

The taxation of Index funds is similar to that of other equity mutual funds.
Because there is no use of an active fund manager to manage a portfolio, the cost of managing the fund is also less. The expense ratio of Index funds is usually between 0.20% to 1% thus giving such funds a probability generating higher returns from other active funds with expense ratios of 1.5% to 2.5%.
But are Index funds better than Actively Managed Fund?
In the long term, it is difficult for an active fund manager to beat the benchmark, again and again, making passive funds a better choice. However, in India, the size of the stock market is not that huge and hence there is still hope left for active funds if managed professionally with the right strategy of allocation in different companies to beat the benchmark.
The Index funds may differ from their benchmark in terms of returns because they hold some allocation in cash in case of redemption and also the expense ratio eats away a minute portion of the returns. Therefore, while selecting an Index it is important to look for the expense ratio of the fund and how much it differs from its benchmark in terms of returns.

So, what are the good Index Funds to Invest in?
In India, there are not a lot of options when it comes to Index Funds because most of them follow only 3 indices: Sensex, Nifty & Nifty 50.
Below are some of the Index Funds which one can look for to invest in:

1. UTI NIFTY FUND – DIRECT

Growth: 66.7249
Dividend: 33.6169

Years 3 months 6 months 1 year 3 years 5 years
Returns(%) -9.65 -4.23 -0.41 9.23 11.27

Scheme AUM: Rs.958 Crores
Expense Ratio: 0.12%
Exit Load: Nil
Fund Manager: Kamal Gada, Kaushuk Basu, Sharwan Kumar Goyal

2. ICICI PRUDENTIAL NIFTY NEXT 50 – DIRECT

Growth : 23.725
Dividend:23.7195

Years 3 months 6 months 1 year 3 years 5 years
Returns(in %) -11.40 -14.51 -11.44 10.84 17.18

Scheme AUM: Rs. 277 Crore
Expense Ratio: 0.44%
Exit Load: 0.25% for redemption within 7 days
Fund Manager: Kayzad Eghlim

3. HDFC SENSEX PLAN – DIRECT

Growth : 302.7437

Years 3 months 6 months 1 year 3 years 5 years
Returns(in %) -9.40 -2.85 2.82 9.53 11.18

Scheme AUM: Rs.259 Crores
Expense Ratio: 0.15%
Exit Load: 0.25% for redemption within 3 days
Fund Manager: Krishan Kumar Daga

Therefore, depending on the risk appetite and time horizon of one’s goal, one can invest in the Index fund because whether active or passive both are equity and as we all know equities are suitable for a longer time horizon only.