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All about Index Funds

All posts about Equity

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Each company in Index has a weightage. If some company is not performing then weightage will become less. If still further if it is not performed will be automatically removed from Sensex 30 or Nifty 50 ,Nifty next 50 list.  This index rebalancing activity is done semi annually by most of the mutual fund companies. UTI follows semi annual strategy.

Some of the companies moved from Nifty Next 50 to Nifty 50.

·         The amount you invested in SIP monthly E.g 10,000 will not be invested in same proportion in Nifty 50 companies
·         Each one will have a weight age based on performance it will be automatic allocation by fund manager.
·         If some company performs superior among 50 then it would be auto pushed to top .

UTI MF Presentation

Why index funds?
·         Low risk with investing in a basket of the best Indian companies .
·         Not for short term. To generate passive income in long term with out doing any work
·         No need any skill,knowledge of share market (not even basic knowledge is required).  It is passively handled by fund manager. Actually fund manager also will not have any work to do in these type of index based mutual funds.
·         Expense ratio is less than 1% in index based Mutual Funds .In general all mutual fund charges on an average 2% as a Commission and in regular plans(broker is involved). 1 to 1.5 % in direct plans where broker is not involved. Index funds has overall less expense ratio among almost all mutual funds.
·         E.g if suppose your age is 30 years .You can work only when your health and age cooperates from middle age. Later how would you get income ?
The solution to this is if you invest some part of your monthly income like 20 to 30% in index funds in long run after 55 years you can get monthly income more than your current salary. Still doubt ?
I will explain the power of compounding.

  • In US , it Warren Buffet has put a open 1 million challenge if any of the fund can perform better than S&P 500 index fund. Finally warren buffer is winner. Please check this link or Google it .

In India why index funds are not so popular reason being there are few mutual funds very less in single digit we can say they out performed the index funds.

  Your iphone/costly phone choice is making you to loose 0.5 crore rupees.
                Yes you heard it right ? You will not sleep this night if you are hearing this for the first time. After 2 years you need to throw away when you get a new version. Buy a decent price mobile Rs 10,000 -15,000  and put the remaining 40,000 in index funds. This will make your money more than 0.5 crore after 20 years. Now think before you buy costly gadgets .

                             Please note i am not promoter of index funds or any mutual fund office. I wanted to share you some tips/suggestions for your investments for money and time saving

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