{"id":2103,"date":"2018-10-23T01:57:03","date_gmt":"2018-10-23T01:57:03","guid":{"rendered":"http:\/\/blog.kuvera.in\/?p=2103"},"modified":"2019-06-10T09:37:54","modified_gmt":"2019-06-10T09:37:54","slug":"1-million-reasons-why-you-should-consider-index-funds","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/1-million-reasons-why-you-should-consider-index-funds\/","title":{"rendered":"$1 Million Reasons Why You Should Consider Index Funds"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_40 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" area-label=\"ez-toc-toggle-icon-1\"><label for=\"item-69e72f4b63102\" aria-label=\"Table of Content\"><span style=\"display: flex;align-items: center;width: 35px;height: 30px;justify-content: center;direction:ltr;\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/label><input  type=\"checkbox\" id=\"item-69e72f4b63102\"><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/kuvera.in\/blog\/1-million-reasons-why-you-should-consider-index-funds\/#Investor_takeaways\" title=\"Investor takeaways\">Investor takeaways<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/kuvera.in\/blog\/1-million-reasons-why-you-should-consider-index-funds\/#Why_Index_Funds\" title=\"Why Index Funds?\">Why Index Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/kuvera.in\/blog\/1-million-reasons-why-you-should-consider-index-funds\/#The_Final_Word\" title=\"The Final Word\">The Final Word<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/kuvera.in\/blog\/1-million-reasons-why-you-should-consider-index-funds\/#The_Final_Final_Word\" title=\"The Final &#8220;Final&#8221; Word\">The Final &#8220;Final&#8221; Word<\/a><\/li><\/ul><\/nav><\/div>\n<h5><span class=\"ez-toc-section\" id=\"Investor_takeaways\"><\/span>Investor takeaways<span class=\"ez-toc-section-end\"><\/span><\/h5>\n<ol>\n<li>We recommend an Index first asset allocation based on your goals and risk profile. You can see it through our goal planning here &#8211; <a href=\"https:\/\/kuvera.in\/goals\" target=\"_blank\" rel=\"noopener\"><strong>Plan your goals<\/strong><\/a><\/li>\n<li>You can see the performance of our Index first asset allocation here &#8211; <a href=\"https:\/\/blog.kuvera.in\/performance-recommended-portfolio-update\/\" target=\"_blank\" rel=\"noopener\"><strong>Performance &amp; Recommended Portfolio Update<\/strong><\/a><\/li>\n<li>There are quite a few Index funds available to the informed Indian investor. You can see them all and invest from here &#8211; <a href=\"https:\/\/kuvera.in\/explore\/all\/others\/equity-index-funds\" target=\"_blank\" rel=\"noopener\"><strong>List of Index Funds<\/strong><\/a><\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" class=\"alignleft wp-image-1323 size-medium\" src=\"https:\/\/blog.kuvera.in\/wp-content\/uploads\/2018\/05\/Simple-300x251.png\" alt=\"\" width=\"300\" height=\"251\" srcset=\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2018\/05\/Simple-300x251.png 300w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2018\/05\/Simple-768x644.png 768w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2018\/05\/Simple.png 940w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/>Warren Buffett, arguably one of the greatest investors of all time, made a $1 million wager in 2007 that no hedge fund could beat the index over a period of 10 years. Buffett believed that even if active management could manage to generate higher returns in select years, they fail to outperform the market in the long run. Long story short, Buffett, won his million dollars in 2017 and donated the money to a charity.<\/p>\n<p><em>Buffett has been a strong proponent of passive investing, and their merits over active investing. The debate of active vs passive investing is an ongoing one. This article adds to the discussion.<\/em><\/p>\n<p>Passive funds, or Index Funds, invest in a group of securities that replicate the index. The purpose of index funds is not to beat the market, but to provide the same returns as the market.<\/p>\n<p><em>Fact: When we say \u2018market\u2019, we refer to the market index, which is a collection of stocks meant to represent the whole of the market. The popular indices in India are Nifty 50, Nifty Nest 50 and Sensex.<\/em><\/p>\n<p>Active funds, on the other hand, are managed by fund managers who try to outperform the market using their investment philosophy and expertise. The funds have higher fees compared to index funds, due to the hands-on management of the portfolio.<\/p>\n<h5><span class=\"ez-toc-section\" id=\"Why_Index_Funds\"><\/span><strong>Why Index Funds?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h5>\n<p><strong>Lower Fees: <\/strong>The expense ratio of Active funds range between 1% to 2.5%, while index funds charge as low as 0.12% (UTI Nifty Index fund). Periodic outperformance is generally not worth the higher fees that\u2019s paid out even in times of downturn.<\/p>\n<p><strong>Lower Risk:<\/strong> Active funds are much riskier than Index funds as they employ hands-on portfolio management in an attempt to outperform the market. Active funds have the freedom to buy any security that they think would generate high returns, which is great when the portfolio managers are right but terrible when they&#8217;re wrong.<\/p>\n<p><strong>Market Performance:<\/strong> Index funds give more or less the same returns as the overall market. Index funds gave an average of 13.7% returns as compared to 10.2% by large cap funds, 8.22% by multi-cap funds and 4.8% by mid-cap funds in the past year.<\/p>\n<p><strong>Transparent Portfolio:<\/strong> Index funds invest in stocks that are in the market indices (be it Nifty50, Nifty next 50, Sensex, etc.). So you know where your money is invested, which makes it easier to track.<\/p>\n<h5><span class=\"ez-toc-section\" id=\"The_Final_Word\"><\/span><strong>The Final Word<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h5>\n<p>Indian investors are slowly, but steadily, shifting to Index funds. The lower fees have been a major incentive for investors who don\u2019t have to incur high costs for their mutual fund returns. With the recent change in SEBI norms, active funds are more likely to under perform, as the stricter definition of large-cap stocks has limited fund managers\u2019 ability to change styles for better returns.<\/p>\n<p>The question that\u2019s being asked more and more is, \u201cwhy pay higher fees for actively managed funds when they don\u2019t outperform the Index?\u201d<\/p>\n<h5><span class=\"ez-toc-section\" id=\"The_Final_Final_Word\"><\/span><strong>The Final &#8220;Final&#8221; Word<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h5>\n<blockquote><p><em><strong>By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals.<\/strong><\/em><\/p>\n<p><em><strong>Warren Buffet<\/strong><\/em><\/p><\/blockquote>\n<p>&nbsp;<\/p>\n<p><em>Niveditha Vishwamithra is an Analyst at <a href=\"https:\/\/kuvera.in\/\">Kuvera.in: India\u2019s first completely free Direct Mutual Fund investing platform<\/a><\/em><\/p>\n<p><em>This article was initially published by <\/em><em>CNBCTV18 <\/em><em> in the <strong>Personal Finance <\/strong>section. <\/em><\/p>\n<p>Start investing through a platform that brings goal planning and investing to your fingertips. Visit <a href=\"https:\/\/www.kuvera.in\"><strong>kuvera.in<\/strong><\/a> to discover <a href=\"https:\/\/kuvera.in\/blog\/direct-plans-better\/\"><strong>Direct Plans<\/strong><\/a> and <a href=\"https:\/\/kuvera.in\/user\/login\"><strong>start investing today.<\/strong><\/a><\/p>\n<p>#MutualFundSahiHai, #KuveraSabseSahiHai!<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Investor takeaways We recommend an Index first asset allocation based on your goals and risk profile. You can see it through our goal planning here &#8211; Plan your goals You can see the performance of our Index first asset allocation here &#8211; Performance &amp; Recommended Portfolio Update There are quite a few Index funds available [&#8230;]<\/p>\n<p><a class=\"btn btn-secondary understrap-read-more-link\" href=\"https:\/\/kuvera.in\/blog\/1-million-reasons-why-you-should-consider-index-funds\/\">Read More&#8230;<\/a><\/p>\n","protected":false},"author":11,"featured_media":2105,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[81],"tags":[93,46,84,43,212],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>$1 Million Reasons Why You Should Consider Index Funds - Kuvera<\/title>\n<meta name=\"description\" content=\"Learn why Index funds are the easy and better option to invest in the markets. 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