If you are one of those investors who don’t want to invest in individual stocks or even pay high investment fees, then index funds are a smart option for you to choose. However, with so many index funds to opt from, it can be a difficult choice to decode which are the best ones suitable for you.
While most investors are imprecise with what Index funds are, it’s a mutual fund where a portfolio is formed to match mechanisms of the market index. Index funds are known to provide broad market exposure while sustaining low operating expenses along with low portfolio turnover. Given that these funds need not be actively managed, there’s not much of purchase or selling activities for generating extra returns. Ideally, investments into Index funds are meant to be long-term and are considered as a decent alternative for high risk-tolerant investors in equity mutual funds. Let’s take a look at some of the best performing Index funds in India:
Reliance Index Fund – Nifty Plan
Reliance Index fund strives to align with the composition of NIFTY, with an aim to create returns that corresponds with the performance of NIFTY. Since its inception, the fund has been consistent with its performance and has given returns of up till 19.95%, 10.96% and 12.38% over a period of 1,3, and 5 years respectively.
ICICI Prudential Nifty next 50 Index Plan
This index fund was launched in the year 2003, also believed to be an index oriented mutual fund. This fund aims to closely monitor the performance of NIFTY 50 Index by making an investment in almost all the stocks ranging in the same weight age that they represent in the index. In the period of one year, the fund has managed to generate a fund return of around 24.87%. In comparison to its peers, ICICI’s fund has managed to have low standard deviation at 13.48% against the standard average of 13.82%. This strongly indicates that the fund is less risky due to its low volatile nature when compared to peers.
HDFC Index – Sensex Plan
The aim of this scheme is to generate returns that are in line with the way S&P BSE Sensex performs, subject to tracking errors in the long run. This scheme is suitable for investors seeking to invest in equity securities backed by the Sensex. Over the period of one year, the fund has managed to generate returns of around 25.54%.While the fund has generated comparatively lower returns as compared to category average, it has still coped up with generating absolute returns over the multi-trailing period.
Though Index funds have been largely accepted in the west, in the Indian markets, they deliver comparatively low returns than expected. However, if compared since its inception, the funds have managed to generate returns that are double digit to investors which is equivalent to many actively managed equity funds. Since not many people are aware about the nature of Index funds, the asset size remains limited.