What is an Index Fund?

Want to know about an index fund? Well, Index funds are very simple. Mutual funds are also known as Index Fund. Index funds are an exchange trade fund designed by a preset of rules to get track of the investments.

An index fund is free from a person’s account manager bias and provides you a fully automated equity portfolio of high companies. It replicates a specific index.

For example, if we talk about Nifty and Index funds simultaneously. In Nifty, there is 50 stocks and in an index fund, it will replicate it. So whatever 50 stocks are there in Nifty same funds will be invested in an Index fund. So the Beta will be the Same.

What is Beta?

Beta is a change in Nifty v/s the change in your investment. So, if nifty goes up by 1% that means your index fund will also go up by 1%. Likewise, if the Nifty goes down by 2% that means your index fund is also going down by 2%.

Now, the question is why is that? Well, the answer is very simple because your mutual fund has replicated the index (Index here is Nifty).

What the Co-Relation in Between Nifty & Index Funds?

Both Nifty and Index funds are lookalike of each other. So, if there’s a change in one will be reflected in another or vice-versa.

What Are Index Funds Charges?

An index fund’s charge is comparatively less since you don’t have to specifically manage it or are required to take a lot of decisions such as in which stocks to invest when to invest along with its pros and cons. So, it’s kind of for beginners, if it is in Nifty it has to be in your Fund. That’s how an Index fund works.

Want to learn more about the difference between the Demat and Trading Account!

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