Over the world stock markets, it has been observed that more than 85% or more fund performances are below the average mean performance of the particular Index category. This has led to investor community to believe that if they just copy down the Index in that portfolio, they will be able to achieve the result. This thought has given rise to Index funds which merely transcript the stocks of the Index in the same proportion in their portfolio. Any change in the stock proportion is made only when there is a change in the stock and its proportion in the said Index.
In Index funds, the fund manager has to merely copy down the Index in his portfolio and there are rarely any changes in the proportions, and if there are they have to change the proportion accordingly. These funds are passively managed and there is no need to do any research work, therefore there isn't frequent turnover of the stock. Thus owing to these reasons expenses in the Index funds are low, therefore, the fees charged by the Fund Manager are also less, and this overall benefits the Investor or the Customer. The performance of an Index Fund is generally the performance of the Index minus the expenses of the Fund Manager. More the fund Manager's expenses lesser the performance of the Index vis-a-vis other similar funds.
The Index Fund provides us a slice of the broadly classified basket of securities at a low cost. Generally, the overall yield in the market is on the same average except unless the fund manager is chasing for a higher yield.
Thus an Index Fund could be summarised as a mutual fund or an ETF ( Exchange Traded Fund) that tracks the performance of an underlying benchmark Index Fund. This, therefore, means that when an Investor buys an Index Fund, they are buying a set of securities that represent a particular segment of the financial market.
Types of Index Funds: The first public-traded Index Fund was launched in America in the year 1976 as VANGUARD 500 Index. There are many Index funds in American Market since then, the most important of them are S&P 500, Russel 3000, etc.
In the Indian Market, we have many Index Fund a list of them is enumerated as:-Nifty 50, NIFTY fifty equal weight, Nifty fifty value 25, Nifty Small cap20, Nifty 100, Nifty 100 equal weight, Nifty midcap 100 equal weight, Nifty midcap 150, NiftyBank, Nifty 200 momentum 30, Nifty small-cap, Nifty small-cap 250, Nifty PSU Bond, +SDL April 2026, etc.
Likewise, there are ETF Index Funds such as ETF Nifty 50, Nifty Next 50, Nifty 100, Nifty midcap 100, Nifty madcap 150, Nifty Bank, Nifty Private Bank, Nifty PSU Bank, Nifty opportunity 50, Nifty India Consumption, Nifty India Infrastructure, Nifty 100 Low volatility 30, Nifty alpha low volatility TRI, Nifty 100 quality 30 Index, Nifty 200 quality Index 30, Nifty 50 Shariah, Nifty 50 value 20, Nifty 100 ESG sector leader, etc.
The commonest of the Index are Nifty50 and the BSE SENSEX which comprise 30 stocks. We give below the list of the best stocks suitable for the yr. 2022 with details of 3 yrs CAGR and commission charged by the Index for the reference of the Readers.
Sl.no. Name of the Fund. 3yrs CAGR Commission charged
1. Nippon INDIA INDEX FUND (SENSEX PLAN DIRECT GROWTH) 18.46%. 0.15%
2. ICICI PRUDENTIAL SENSEX INDEX FUND DIRECT-GROWTH 20.00%. 0.17%
3. HDFC Index Fund Sensex Direct Plan 18.45%. 0.2%
4. IDFC Nifty Fund Direct Plan 17.90%. 0.1%
5. ICICI Prudential Sensex Index Fund Growth 19.76%. 0.3%
6. UTI Nifty Index Fund Growth Direct 17.83% 0.2%
7. LIC MF Index Fund-Sensex Plan Direct-Growth 18.00%. 0.37%
8. ICICI Prudential Nifty Index Fund 17.59%. 0.17%
9. HDFC Index Fund Sensex Plan 18.23%. 0.40%
10. UTI Nifty Index Fund Direct 17.74%. 0.30%
 shows that during the last 1 year assets under Index funds have grown from 15,000 ...){kind=link}
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