Index fund as the name suggest invest in some of the frontline indices including Nifty 50, Bank Nifty etc. And the fund typically mirrors return of the fund. Being passively managed they carry low expense ratio and allow investor to have an exposure to the equities market. Infact for the retail investor with little know how of the stock market, index funds are the simplest and safest option.
How to invest in Index funds?
For investing in index funds - you can either go for Index ETFs or you can invest in open ended index funds. Now for the open ended funds, you can invest from the AMC's website and here you do not need to have a demat account.
Should You Invest In Index funds?
Amid Covid 19 led bouts of volatility in the indices, index funds can be the preferred option and even capture short term fluctuation.
Being the safe bet and also suggested to the must-have option in one's mutual fund mix with 5-10% allocation. Here we suggest some of the best Index funds to invest in 2021:
1. UTI Nifty Index Fund:
This is a CRISIL 3-star rated fund with AUM of Rs. 3591 crore. The fund 1-year, 3-year and 5-year return has been 58%, 11.82% and 13.76 percent. Expense ratio of the fund is a meager 0.14 percent. The fund's top stocks include HDFC Bank, RIL, Infosys, HDFC and ICICI Bank among others.
2. ICICI Prudential Nifty Index Fund:
This is a fund managing asset base of Rs. 1443 crore. The expense ratio is slightly on a higher side of 0.45%. The fund's 5-year annualized return has been to the tune of 13.80 percent.
3. UTI Sensex ETF:
The 5-star fund commands a significant AUM of Rs. 13140 crore. The fund management charges are 0.07 percent. The fund has shown very good performance among peers. 1-year SIP annualized returns have been over 40 percent. Top stocks in the fund's portfolio include companies' like RIL, HDFC Bank, Infosys, HDFC and ICICI Bank among others.
4. HDFC Index Sensex Fund:
The 3-star rated fund has an asset base of Rs. 2063 crore. The 1-year return from the fund has been 54 percent. The fund carries moderately high risk as per the risk-o-meter. The fund has almost 89 percent into Large cap stocks. The benchmark of the fund has been S&P BSE Sensex TRI.