How to Invest in the Nifty Index Fund directly?
A Nifty Index Fund is a Mutual Fund scheme that tracks the Nifty index, meaning the fund invests in Nifty’s stocks. Nifty50 is an index of India’s top 50 Indian companies in market capitalisation. This index reflects the broader Stock Market’s performance, and the corresponding index fund aims to generate similar returns but with less risk. Investing in a Nifty Index Fund is like investing in Mutual Fundsthanan individual stock.
The Nifty Index is designed to complement the companies in the Nifty50 index. The weightage of the stocks in the index is like the proportion of components of the Mutual Funds. In case the proportion of stock to Nifty50 changes so does the weightage of the portfolio constituents. Therefore, it mirrors the Nifty50 index irrespective of how the rest of the market performs.
How to invest in the Nifty Index fund?
If you have Demat and Trading Account, log in to them and navigate to the Mutual Funds section. Here, choose the best Nifty Index Fund. You might want to research its performance and track record before hitting the buy button. Nowthat you have chosen the right fund, you can either opt for aSystematic Investment Plan or SIPs or buy units of the fund directly by paying a lump sum.
Why invest in the Nifty index fund?
With traditional Mutual Funds, the fund manager picks the stocks based on the broad-based criteria. While these funds offer sound returns, they rarely provide thecorrect broad market exposure or diversification. So, your net asset value can still go down, even when the markets are doing well,owing to the underperformance of select stocks.
With an Index Fund, this is unlikely to happen because the underperformance of a select stock gets balanced out by the outperformance of other stocks. This way, you are appropriately diversified and exposed. At the same time, you have a degree of safety. Plus, the top Nifty Index Fund eliminates the chances of emotional bias factoring in the stock selection process because the fund manager does not choose the stocks since the fund mirrors the index.
Investing in Mutual Funds or index funds like Vanguard Small Cap Index can give you better returns, thus helping you reach your financial goals faster. Also, since these funds are passively managed, you need not spend much time on portfolio monitoring.
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