Table of Contents
Why Invest in Index Funds in India?
What are the 5 Best Index Funds for 2024?
Investing in index funds has become increasingly popular for investors looking for a simple and cost-effective way to gain exposure to the stock market. Index funds are known for their passive management style, as they aim to replicate the performance of a specific market index, such as the Nifty or Sensex in India. Know about the five best index funds for 2024, based on their historical performance, expense ratios, and fund managers.
Why Invest in Index Funds in India?
There are several advantages associated with investing in Index Funds:
Diversification
Index Funds consist of a collection of multiple stocks and securities, allowing investors to achieve diversification. This aligns with the fundamental principle of Asset Allocation, ensuring that an investor’s assets are not concentrated in a single avenue. Consequently, this strategy reduces the risk associated with relying solely on one investment.
Cost-effectiveness
Index Funds exhibit lower operating expenses compared to other mutual fund schemes. Unlike traditional funds, Index Funds do not require a dedicated team of research analysts to conduct extensive research on individual companies, incurring substantial costs. Instead, index fund managers only need to replicate the index itself. Consequently, the expense ratio of index funds remains comparatively lower.
Limited Managerial Influence
Index Funds simply mirror the movement of a specific index, eliminating the need for fund managers to make decisions regarding individual stock selection. This serves as an advantage since it prevents the manager’s personal investing style, which may not consistently align with market trends, from affecting the fund’s performance.
Investing in index funds can offer the benefits of diversification, cost efficiency, and reduced managerial influence on investment decisions.
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What are the 5 Best Index Funds for 2024?
Here are the five best index funds for 2024:
1. LIC MF Index Fund Sensex
The objective of the LIC MF Index Fund Sensex is to closely replicate the performance of the Sensex index while minimizing tracking errors. Since its inception in November 2002, the fund has demonstrated a commendable performance, delivering a compound annual growth rate (CAGR) of 13.3%. In 2022, it yielded a return of 4.6%, following a robust performance of 21.9% in 2021.
As of August 22, 2023, the Net Asset Value (NAV) stands at ₹121.97, with total Assets under Management (AUM) of ₹74 Cr as of July 31, 2023. The fund maintains a moderate expense ratio of 0.99% and is categorized as having a moderately high risk level. The fund is managed by Jaiprakash Toshniwal.
2. Nippon India Index Fund – Sensex Plan
The Nippon India Index Fund – Sensex Plan has the primary objective of closely replicating the composition of the Sensex index while minimizing tracking errors. Since its launch in September 2010, the fund has exhibited strong performance, delivering an impressive CAGR/Annualized return of 9.6%. Notably, it achieved a return of 5% in 2022 and an outstanding 22.4% in 2021.
As of August 22, 2023, the Net Asset Value (NAV) stands at ₹32.7775, with assets under management (AUM) totaling ₹487 Cr as of July 31, 2023. The fund maintains a moderately high-risk level, with an expense ratio of 0.74%. It is managed by Mehul Dama.
3. ICICI Prudential Nifty Index Fund
The ICICI Prudential Nifty Index Fund is designed to replicate the performance of the S&P CNX Nifty index, aiming to deliver returns closely aligned with the index. Since its establishment in February 2002, this fund has maintained a commendable track record, boasting an impressive CAGR/Annualized return of 14.8%. In 2022, it generated a return of 5.2%, following a robust performance of 24.9% in 2021.
The fund includes a NAV (as of August 22, 2023) of ₹192.378, an Assets Under Management (AUM) of ₹4,930 Cr as of July 31, 2023, a competitive expense ratio of 0.39%, and a risk level classified as moderately high. The fund is managed by Kayzad Eghlim and Nishit Patel.
4. SBI Nifty Index Fund
The SBI Nifty Index Fund aims to replicate the Nifty 50 Index’s performance while minimizing tracking errors. Since its launch in January 2002, the fund has exhibited strong performance, boasting a CAGR/Annualized return of 14.2%. Notably, it achieved a return of 5.1% in 2022 and an impressive 24.7% in 2021.
The fund includes a NAV of ₹169.297 as of August 22, 2023, with assets under management (AUM) of ₹4,796 Cr as of July 31, 2023, an expense ratio of 0.5%, and a moderately high risk level. The fund is managed by Raviprakash Sharma and Mohit Jain.
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5. IDBI Nifty Index Fund
The IDBI Nifty Index Fund has the primary objective of closely mirroring the performance of the S&P CNX Nifty index while prioritizing the reduction of tracking errors. Since its inception in June 2010, the fund has consistently delivered strong results, boasting a Compound Annual Growth Rate (CAGR) of 10.3%. In the most recent year, it exhibited impressive performance with a 16.2% return.
As of July 28, 2023, the fund includes a Net Asset Value (NAV) of ₹36.2111, an Assets Under Management (AUM) of ₹208 Cr as of June 30, 2023, an expense ratio of 0.9%, and a risk level categorized as moderately high.
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Conclusion
Investing in index funds can be an excellent strategy for long-term investors who seek market exposure without the complexities of actively managed funds. The five index funds mentioned above offer a range of options, each with its unique features and historical performance. As with any investment, it is essential to consider your financial goals, risk tolerance, and investment horizon before making a decision. Consulting with a financial advisor can also provide valuable insights tailored to your specific needs.
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