What is Index Fund


An Index Fund is one of the mutual funds or exchange-traded funds (ETFs) that are designed to follow preset rules just to make sure that the fund can easily track the components of investments or of a market index.

Index funds also help in balancing the risk in the portfolio of an investor, as market swings turn out to be less volatile across as index as compared with individual stocks.

Quick Takeover:

  • They pool money from different investors to buy bonds, securities or individual stocks to make up a particular market-index.

  • They are one of the good ways to minimize risk, the reason being they track a market index, which somehow rises in value over the certain time-period.

  • Index funds are known as a passive investment with low fees as compared by those ‘mutual funds’ that are managed on a daily basis by brokers. They also show better returns.


Best 5 Index Mutual Funds

ICICI Pru Nifty Next 50 Index Fund(G)

Returns 3Y: 14.88%

IDBI Nifty Junior Index Fund (G)- Direct

Return 3Y: 14.78%

HDFC Index Fund Nifty 50 Plan(G)

Return 3Y: 15.33%

UTI Nifty Index Fund (G)- Direct Plan

Return 3Y: 15.34%

SBI Nifty Index Fund (G) - Direct Plan

Return 3Y: 15.18%

  • Past Performance Is No Guarantee of Future Results

Before Opting for Index Funds, Let’s Figure Out The Benefits Regarding The Same. Here:

  • Return Factor: Unlike actively managed mutual funds, index funds track the overall performance of the underlying benchmark passively. Although, these funds do not point to beat the benchmark but to replicate the performance. NOTE: Before investing, try to shortlist a fund which has the minimum tracking error; lower the errors, better performance of the fund is going to be.
  • Risk Tolerance: Not to forget, index funds are less prone to equity-related risks and volatility. They are an amazing option to consider during a market rally if you want to earn better returns. TIP: Having a mix of index funds and actively-managed funds in your portfolio is recommended.
  • Financial Goals: Being the haven of high risk-high return, these funds are good to go for generating enough wealth for your goals.
  • Tax on Gains: You earn capital gains when you redeem units of index funds, also the capital gains are taxable (depends on how long you stay invested (holding period)).

How to Invest in Index Funds with Gulaq

How index fund works is not a tedious job, especially with Gulaq. With hassle-free and paperless documentation, the summing-up of your investment journey becomes easy. All you need to do is sign-in at gulaq.com. Check your KYC for FREE. Select the type of index fund from hand-picked mutual funds and the tenure. And it’s done!

How Index Funds Works?

An Index fund is a mutual fund which is designed to track the returns of a market index. An index is basically a group of securities that represents a particular segment of the market (stock market, bond market, etc.). The index fund works by tracking a benchmark like the Nifty and Sensex. Their portfolio will consist of exactly the same proportions of stocks as either of these benchmarks. Since the index fund is passively managed funds that allow investors to invest intelligently in the stock market. An index fund manager decides which stocks must be bought and sold in retrospect of the underlying benchmark. The whole purpose of the index fund is to match the benchmark performance. In case, if there is a small difference between the fund performance and index, then it is known as tracking error. An index fund manager always tries to reduce the tracking error. It is the safest option for the retail investor who have no prior idea of the stock market.

Who Should Invest in Index Funds?


Investing in index funds is solely depends upon the investor preferences and risk appetite. These funds are ideal for those investors who want to avoid risk and get expected returns. These funds do not require much extensive tracking. The goal of the index fund is to track the performance of the benchmark. The fund manager is not expected to implement any style or strategy to generate excess returns over and above the index returns. These funds will give you returns matching the upside that the index sees. So, any retail who doesn’t have much prior knowledge about market operation, then it’s better to start investing in Index fund.

Frequently Asked Questions


How to invest in nifty index fund? 

Index fund is a best way to passively invest in the growth of the market. You can invest into Nifty via ETF (Exchange Traded Fund), this is the only option to invest in Nifty Index. For a short-term trading perspective, investors can buy Nifty 50 future. It will provide you the same exposure into Nifty with same money as compare to ETF. 

How to buy nifty index fund direct growth?

Index funds are low cost and passive way to invest in the entire basket of the stock market. The best way to buy an index fund direct growth is through the SIP or future. An investor can buy it from a direct mutual fund platform that has the best advisory support.

What is an index fund in mutual fund?

An index fund is a type of mutual fund in which a portfolio is constructed to match or track the components of a financial market index. 

What is vanguard 500 index fund?

Vanguard 500 Index fund, which tracks the S&P 500 is one of the best-known largest trading funds. The fund provides exposure to US top 500 largest companies. They have a value of about three fourths of the U.S. stock market.  

What is an index fund and how does it work?

An index fund is mainly a fund which basically tracks a benchmark like the Nifty or Sensex or S&P 500. It basically a group of securities defining a market segment, which can be either stocks or bond market instrument. In case of India, it is BSE Sensex and NSE Nifty. Basically, an Index fund is a passive fund, which prime motive is to beat the benchmark performance. 

What is an index fund and how does it work?

An index fund is mainly a fund which basically tracks a benchmark like the Nifty or Sensex or S&P 500. It basically a group of securities defining a market segment, which can be either stocks or bond market instrument. In case of India, it is BSE Sensex and NSE Nifty. Basically, an Index fund is a passive fund, which prime motive is to beat the benchmark performance. 

Which is the best index fund in India?

Here is the list of best index fund in India. 

  • SBI Nifty Index Fund  
  • Reliance Index Fund – Sensex Plan 
  • UTI Nifty Index Fund – Direct Growth 
  • ICICI Prudential Nifty Next 50 Index  
  • Franklin India Index Fund Nifty Plan 

How much return from index fund?

Index funds are generally for a long-term investment horizon. On an average, they have provided more than 10% to 12% on an annual basis 


How to invest in S&P 500 index funds from India?

To invest in S&P 500 index fund from India, an investor needs to follow these procedures: 

  • First, open an account with an Indian broker. There are numerousnumbers of funds that offer funds that invest in US markets such as ICICI, Franklin, Motilal Oswal, DSP BlackRock, Birla SunLife 
  • An investor needs to open an account with an international broker, which is little bit time consuming. You can invest in a range of funds that track S&P 500. 

What is an exchange traded index fund?

An exchange traded index fund is basically a collection of stocks which are sold under the single name on a stock exchange. It is generally a passive managed fund, once it is floating on an exchange, the fund synchronizes the performance of the underlying index. 

List out the vanguard index fund to invest.

Here is the list of the best Vanguard index fund to invest: 

  • 500 Index Fund (Admiral Class) – VFIAX. 
  • REIT Index Fund (Admiral Shares) – VGSLX. 
  • Growth Index Fund (Admiral Shares) – VIGAX. 
  • Total Bond Market (ETF) – BND

Which sip index fund is the best?

Here is the list of few SIP index fund with low tracking error, 

  • HDFC Index Fund- Nifty (G) 
  • ICICI Pru Nifty Index Fund (G) 
  • IDFC Nifty Fund Regular 

What is the best index fund to invest in 2019?   

Here is the list of best index fund to invest in 2019. 

  • UTI Nifty Index fund Direct- Dividend. 
  •  IDBI Nifty Index fund Direct- Growth 
  • LIC MF Index Nifty Fund Direct- Dividend 

What is small cap index fund?

Small cap index funds are those index funds who invest money in the companies having lower market capitalization        

What is the large cap index fund?

 Large cap index fund is mainly an index fund that invests money in companies with having large market capitalization.

What is the HFRI fund of funds composite index?

HFRI funds of funds composite index is a global, equal weighted index of the largest hedge funds which are open to the new investments and offer quarterly liquidity or better result. 

What is UTI nifty index fund?

UTI Nifty Index fund is basically a fund of fund that is an equity mutual fund, which invest their money in Nifty 50 stocks with the same proportion as that of Nifty value. 

What is SBI life index fund?

SBI life index fund is basically a scheme launched by SBI, which invest in stocks comprising the Nifty 50 index in the same proportion as their weightage in the index with the objective of achieving returns equivalent to the total returns of Nifty 50 index by minimizing the tracking error between the benchmark index and scheme. 

Can index funds be traded like a stock?

 Yes, index funds can be traded like stocks. 

What is the index fund expense ratio?

The expense ratio of an index fund is approximately quite low, close to 0.2 %. 

When are index funds taxed?

 The taxation of index fund totally depends upon the time period in which an investor is invested. Whatever the capital gains you make during the holding period of up to one year are called as Short-term Capital gains (STCG). They are taxed at the rate of 15%. But the capital gains obtained after holding more than one year are called as Long-term capital gain (LTCG). Long Term Capital Gain more than Rs 1 lakh will be taxed 10% without the benefit of indexation. 

List out the index fund for retirement.

Here is the list of index fund for retirement.  

  • Reliance Retirement Fund
  • Tata Retirement Savings Fund Progressive Plan Direct-Growth 
  • HDFC Retirement Savings Fund Equity Plan Direct-Growth 

Difference between index fund or managed fund.

Index fund is basically a passive fund, whereas a managed fund is an active fund. In the case of Index fund, there is no role of a fund manager as itmust replicate the index. But in case of managed fund, a fund manager chooses the stocks by doing deep research and analysis. 

index fund vs hedge fund

 An index fund is basically a type of mutual fund, which portfolio is constructed to match the performance of a market indices whether its Nifty, Sensex, S&P500 and Dow Jones. 

 A hedge fund is an alternative passive investment vehicle available only to institutional or large investor. The rate of returns of an index fund is low compared to the hedge fund 

What is the index fund 5-year performance?

The index fund 5-year performance is between 10% to 11 % on an average.

How to invest in nifty 50 index funds?

Nifty 50 Index fund consists of top 50 listed companies in the National stock exchange. This is the only option for the investor. Nifty 50 can be bought in another segment of trading known as Future and Options. It is also called as derivatives, which mean the value is depended on some other underlying asset. 

What is nifty index fund?

A nifty index fund is a mutual fund which invests in the National stock Exchange 

What is an equity index fund?

Equity index fundis a portfolio constructed to match the components of an equity market index, such as Nifty, BSE or S&P 500. 

How to invest in index funds in India?

To invest in index funds in India, user needs to follow these procedures: 

  • Go to the portal of Gulaq. 
  • Further enter your personal details regarding the amount of investment and period of investment. 
  • Now, make sure to get done your e-KYC. 
  • Again, invest in your favourite index fund from the list of mutual funds. 

What is a benchmark index in mutual fund?

A benchmark index is basically an unmanaged group of securities which are considered as a benchmark to measure a fund’s/stock’s performance. Benchmark index is generally broad market indices like BSE Sensex, CNX Nifty of the Indian Stock market with which mutual fund returns are compared. 

What is S&P 500 index fund?

S&P 500 is the standard and poor stock market index fund based on the size of leading 500 US companies. The index lists out the largest 500 publicly traded companies in the United States as measured by “Market Capitalization “. 

What is index fund?  

 An index fund is a group of stocks or other securities that invest in those indices in their respective weights. The idea behind index funds is the failure of actively managed funds to beat the indices over the long term. 

Which nifty index fund is best?

Here is the list of best, nifty index fund: 

  • SBI Nifty Index Fund 
  • ICICI Pru Nifty Index Fund
  • Reliance Index Fund Nifty Plan (G)
  • IDBI Nifty Index Fund

Why index fund over ETF?

There are several reasons for choosing an index fund over ETF 

  • Index fund has low transaction compared to the ETF. 
  • Index fund allows you to invest through SIP. 

What is nifty index fund direct growth?  

It is basically a passively managed index fund, which would invest in all the stocks comprising Nifty 50 Index in the same proportion as their weighted in the index. 

Where to buy nifty index fund?

Index funds of the open-ended category don’t requireanydemat account. These can be bought in typical SIPs They can be bought in typical SIPs as these funds allow fractional units to be transacted. One can buy these funds at NSE website. 

What is Nifty next 50 index funds?     

Nifty Next 50 is an index which basically represents the performance ofthe next 50 stocks of National stock exchange that comes after the top 50 stocks in order of free float market capitalization. 

Which index fund is right for me?     

Investment decision in an index fund totally depends upon an investor risk preferencetime period and investment goals. Basically, these index funds are good for those investors, who are risk averse and want safe returns. There are mainly two major indices in India Nifty and BSE. Depending on one’s investment goals one can invest in either, Nifty is derived from national fifty companies whereas BSE is derived from Sensitive Index. 


What is the mid cap index fund?

A mid cap index fund is basically an index fund that invests money in companies with having capitalization in the middle range. 


Which index fund to invest in for the long term? 

Here is a list of index fund to invest in for the long term: 

  •  UTI Nifty Index Fund 
  • ICICI Prudential Nifty Next 50 Index Fund. 
  • Franklin India Index Fund  


How to choose an index mutual fund?


To choose an index mutual fund, there are certain things must be taken into considerations. 

  • First, an investor needs to select an index whether it’s NSE, Sensex and S&P500 depending upon their preferences. 
  • Afterwards, decide whether you want to buy the mutual fund directly from a company or a brokerage. 
  • Look out, they offer commission fee index fund or without having any charge index fund. 

How much to invest in index funds?

There is no such thing as magic number or figure to invest in index funds. It depends upon an investor preference, risk and investing amount. But minimum one should invest more than multiple thousand. 

  • Afterwards, decide whether you want to buy the mutual fund directly from a company or a brokerage. 
  • Look out, they offer commission fee index fund or without having any charge index fund. 

Will index funds pay dividends?   

Yes, Index funds does pay dividends. 

Which index fund does buffet recommend?

Buffet is a huge believer in index funds. He mainly recommends top four funds: 

  • Vanguard 500 Index Fund Investor 
  • Schwab S&P 500 Index Fund 
  • Fidelity 500 Index Fund 
  • T. Rowe Price Equity Index 500 Fund 

Are index funds safe?

yes Index funds are safest of the investment. 

Difference between Index fund and ETF.

The list of differences between Index fund and ETF: 

  • An index fund is a theoretical segment of the market as it represents large companies, small companies or the companies separated by industry. Whereas the ETFs is a basket of asset traded securities. 
  • Index have no transaction fee/commission, but ETF does have a high trading cost. 
  • Index funds are traded like Mutual Funds, whereas the ETF is traded like stocks. 

Index funds vs Stock   

Investor always has concern about the selection of index funds vs stock. Which one will add more to their investment portfolio? The basic difference is when you buy shares of stock in individual businesses, you become the owner of the company, which basically means you get a proportional share of profit and losses depending upon the success and failure of the company. 

When you buy an index fund, you are buying a basket of company shares under a certain index such as Dow Jones Industrial index and S&P 500. In effect, if the investor who buy the shares of index fund own shares of different companies indirectly. 

Which one is best index fund or savings account?


 It totally depends upon the investor to choose an index fund or saving account. Saving account is for those investors who want to take the minimum risk with their capital, whereas the index fund is for those who want to take risks with their capital. A savings account provides a rate of returns about 7%, whereas an index fund provides the rate of returns between 10% to 12 %. 

What is the index fund return for one-year period?

On an average the index fund returns for one-year time is between 12%to 14%.

Start Investing in Index Mutual Funds


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Investments in Mutual fund & Securities Market are subject to market risks. Please read the scheme information and other related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund or designing a portfolio that suits your needs. Terms and conditions of the website are applicable.

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