In order to maximize profits, index funds mimic the performance of a stock market index, such as the Sensex or Nifty 50. They are one of the most popular passive investments. They are perfect for investors with a moderate stomach for risk due to their broad market exposure, minimal operational costs, and returns. Here is a comprehensive list of the top 13 best index funds 2022. If you are thinking about investing in index mutual funds, look at this!
| Name | Expense Ratio | AUM | 3Yr Return | 5Yr Return |
| Nippon India Index Fund Sensex Plan Direct-Growth | 0.15 | 275 Cr | 12.76% | 11.82% |
| HDFC Index Sensex Direct Plan-Growth | 0.20 | 3,312 Cr | 13.25% | 13.83% |
| ICICI Prudential Nifty Direct Plan-Growth | 0.18 | 2,915 Cr | 13.25% | 12.92% |
| Aditya Birla Sun Life | 1.03 | 27.363 Cr | NA | NA |
| IDFC Nifty Direct Plan-Growth | 0.08 | 409 Cr | 12.76% | 11.82% |
| UTI Nifty Index Fund Direct-Growth | 0.21 | 6,882 Cr | 13.24% | 13.14% |
| Tata Index Sensex Direct | 0.27 | 133 Cr | 12.76% | 11.82% |
| HDFC Nifty 50 Plan Direct-Growth | 0.2 | 5,660 Cr | 13.10% | 13.06% |
| Aditya Birla Sun Life Nifty 50 Direct-Growth | 0.33 | 355 Cr | 12.96% | 12.55% |
| SBI Nifty Index Direct Plan-Growth | 0.18 | 2,251 Cr | 12.95% | 12.87% |
| Axis Nifty 100 Index Fund Direct-Growth | 0.15 | 768 Cr | 57.93% | NA |
| DSP Nifty 50 Index Fund Direct-Growth | 0.22 | 184 Cr | 12.76% | NA |
| Tata Index Nifty Direct | 0.16 | 261 Cr | 12.76% | 11.82% |
What exactly is an index fund and how does it work?
An index fund mimics the performance of the underlying index by following a market index. Fund managers play little to no role in purchasing and selling equities in index mutual funds, in contrast to actively managed funds.
Fund managers are less expensive than other mutual funds since they do not actively make all purchasing and selling decisions. However, based on the makeup of the underlying benchmark, the fund manager chooses which equities must be acquired and sold. As a result, those looking for low-cost investment solutions will find it easier to invest in index funds India.
Advantages of Investing in Index Mutual Funds
Inexpensive– Due to their use of a passive investing method, index funds have lower expense ratios than other mutual funds. Therefore, index mutual funds can be a choice to explore if you’re looking for low-cost investment options.
Greater Market Exposure– You can access a variety of industries and stocks by investing in index mutual funds. In this manner, you can use a single fund to benefit from returns from a bigger and more diverse market segment.
Transparency- Knowing the portfolio of an index mutual fund is simple and straightforward, in contrast to active mutual fund vehicles. The equities the fund holds can be identified simply by knowing its benchmark index.
What should I keep in mind before investing in the top index funds?
Here are some tips on how to invest in index funds-
Cost of Investment- One of the most crucial factors when comparing two index funds that track the same index is the expense ratio. The returns from two funds that track the same index will be comparable. Between the two, the top Index fund has a lower expense ratio and produces higher returns.
Fund Efficiency- Check the fund’s performance before investing. Minimum tracking error is a sign of strong fund performance. Index mutual funds work by replicating the performance of an index. Tracking error is the term for any minor variations from the index that may occur. Your best option is to invest in funds with a low tracking error.
Financial Horizon– Investors wishing to make long-term investments might consider index funds. Index mutual funds’ returns change over time. They are therefore not the best choice for short-term investing. Help the fund reach its full potential over a long period of time, perhaps 7 to 10 years.
Risk- Index funds are incredibly unpredictable. The dangers of investing in index funds must be understood by you. Mix actively managed funds and index funds to lessen the risks associated with index mutual funds.
Who can invest in index funds?
As part of your asset allocation, it is advisable to invest in funds. Such funds can also be chosen by novice investors as a first step in their financial path.
- Investors who do not frequently want to monitor performance of a fund
- Investors who prefer low-risk investments
- Investors seeking affordable funds
Index Fund Taxation
These funds’ returns are taxed and are based on the holding period and fund type. A short-term capital gains tax (STCG) of 15% will be applied to your earnings if you redeem index fund units within a year.
On the other hand, if your holding duration exceeds 12 months, you may be required to pay long-term capital gains tax of up to 10% on gains exceeding Rs. 1 lakh.
Index funds have outperformed actively managed equity funds over the past couple of years. Additionally, these funds are less expensive and have a long-term potential for producing substantial returns. Before investing, it is advisable that you take into account, your risk tolerance, taxation, fund performance, and overall cost among other things. Now that you are aware of the best index funds in India, you can think about investing in index mutual funds with trusted brands like Navi Mutual Funds.
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