Are you hesitant to invest in mutual funds? Did you know that there is an option within mutual funds that can offer good profits with low risk? This option is called an ‘Index Mutual Fund’!
Financial experts emphasize that you need to ‘invest to combat inflation.’ However, many people remain apprehensive about investments, especially in the stock market, and often overlook mutual funds.
Many middle-class families still choose to keep their money in fixed deposits (FDs) or savings accounts, making it difficult to cope with inflation.
In contrast, mutual funds have a proven track record of delivering strong investment returns over the long term. For those looking to achieve good returns with minimal risk, ‘index funds’ are an excellent choice! So, what exactly are index funds? What benefits do they offer? Let’s explore these details.
What are Index Mutual Funds? Index mutual funds invest in stock market indices like the Sensex and Nifty.
For instance, the Nifty 50 includes stocks from 50 different companies. When these stocks rise in value, the Nifty 50 index increases; when they fall, so does the Nifty.
Similarly, a Nifty 50 Index Mutual Fund consists of stocks included in the Nifty 50 index. Therefore, the Fund’s returns align with the index’s performance.
Index mutual fund managers do not need to manage them actively. Their primary job is to select an index and periodically invest the investors’ money in the respective stocks based on the weightage determined by SEBI.
Index mutual funds function like fixed deposits (FDs) within the stock market! Historically, these funds have yielded around 12% returns over the long term, becoming the stock market benchmark.
For example, if you invest Rs. 5,000 in an index mutual fund, your investment could grow to approximately Rs. 18 lakhs. This could lead to an investment value of around Rs. 1,76,49,569! With this low risk, you can become a millionaire.
Index funds are ideal for those who seek substantial profits over the long term while minimizing risk.
However, before investing in mutual funds, it’s essential to consider their historical performance, expense ratio, and tax implications. Mutual funds can be a beneficial investment, but they also come with risks.
Note: This is an informative article. We do not endorse any specific funds. It is advisable to consult a SEBI-registered financial advisor before making investment decisions.