{"id":42018,"date":"2026-08-05T10:00:24","date_gmt":"2026-08-05T04:30:24","guid":{"rendered":"https:\/\/kuvera.in\/blog\/?p=42018"},"modified":"2026-08-04T21:55:55","modified_gmt":"2026-08-04T16:25:55","slug":"can-you-lose-money-in-an-index-fund","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/can-you-lose-money-in-an-index-fund\/","title":{"rendered":"Can You Lose Money in an Index Fund?"},"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-6a736cab16d20\" 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-6a736cab16d20\"><\/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-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/kuvera.in\/blog\/can-you-lose-money-in-an-index-fund\/#what_causes_losses\" title=\"what causes losses\">what causes losses<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/kuvera.in\/blog\/can-you-lose-money-in-an-index-fund\/#how_bad_can_it_get\" title=\"how bad can it get\">how bad can it get<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/kuvera.in\/blog\/can-you-lose-money-in-an-index-fund\/#the_real_problem\" title=\"the real problem\">the real problem<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/kuvera.in\/blog\/can-you-lose-money-in-an-index-fund\/#when_they_do_not_lose_money\" title=\"when they do not lose money\">when they do not lose money<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/kuvera.in\/blog\/can-you-lose-money-in-an-index-fund\/#frequently_asked_questions\" title=\"frequently asked questions\">frequently asked questions<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p class=\"ds-markdown-paragraph\"><span class=\"\"><a href=\"https:\/\/kuvera.in\/mutual-funds\/all\/equity\/value-fund\">index funds<\/a> can lose value. they track the market. market falls, fund falls. no floor. no guarantee.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">but it is not like a single stock. a stock can go to zero. a broad <a href=\"https:\/\/kuvera.in\/mutual-funds\/all\/equity\/value-fund\">index fund<\/a> cannot. the entire market would have to collapse.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">the risk is not total loss. it is volatility. and timing.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"what_causes_losses\"><\/span><strong><span class=\"\">what causes losses<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">markets drop. <a href=\"https:\/\/kuvera.in\/mutual-funds\/all\/equity\/value-fund\">index funds<\/a> drop with them. nifty fell 38% in 2020. 16% in 2022. selling at the bottom locks in losses.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">large companies dominate <a href=\"https:\/\/kuvera.in\/mutual-funds\/all\/equity\/value-fund\">index funds<\/a>. market-cap weighting means more money in bigger stocks. by mid-2025, seven us stocks made up 34% of the s&amp;p 500. up from 20% in 2023. not as diversified as it looks.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">in india, two companies made up nearly 40% of the defence index. that is a bet on two stocks. not a diversified portfolio.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">tracking error costs money. the fund does not perfectly match the index. a 0.5% tracking error means 0.5% less return each year.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">index rebalancing costs money. when the index changes, the fund buys and sells. transaction costs add up. sometimes forced to buy high and sell low.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">passive funds sell together. this can cause sharp drops. the popularity of passive investing can make markets more fragile.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"how_bad_can_it_get\"><\/span><strong><span class=\"\">how bad can it get<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">nifty fell 59.5% in 2008. msci india fell 62.6% that year. recovery took years. about 6 years and 10 months.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\"><a href=\"https:\/\/kuvera.in\/mutual-funds\/all\/equity\/value-fund\">index funds<\/a> can lose significant value. past performance is not a guarantee.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"the_real_problem\"><\/span><strong><span class=\"\">the real problem<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">the fund is not the problem. the investor is.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">most losses happen because people sell at the bottom. markets drop 20%. they panic. they sell. markets recover 30%. they miss it.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\"><a href=\"https:\/\/kuvera.in\/mutual-funds\/all\/equity\/value-fund\">index funds<\/a> work if the investor stays invested. 7-10 years is generally recommended.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"when_they_do_not_lose_money\"><\/span><strong><span class=\"\">when they do not lose money<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">over long periods, index funds have delivered positive returns. from 1999 to 2026, \u20b910 lakh in sensex grew to roughly \u20b92.89 crore. missing the five best days would have cut it to \u20b91.80 crore.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">index funds aim for equity-like returns. they are not guaranteed in any given year.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"frequently_asked_questions\"><\/span><strong><span class=\"\">frequently asked questions<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p class=\"ds-markdown-paragraph\"><strong><span class=\"\">1. can an <a href=\"https:\/\/kuvera.in\/mutual-funds\/all\/equity\/value-fund\">index fund<\/a> go to zero ?<\/span><\/strong><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">extremely unlikely. the entire market would have to collapse.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><strong><span class=\"\">2. what is the biggest risk ?<\/span><\/strong><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">behavioural risk. selling during a downturn locks in losses.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><strong><span class=\"\">3. how much can an index fund lose ?<\/span><\/strong><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">nifty fell 59.5% in 2008. significant losses are possible.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><strong><span class=\"\">4. are index funds safe for beginners ?<\/span><\/strong><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">simple and low cost. but they can lose value. a 5-7 year horizon is recommended.<\/span><\/p>\n<p class=\"ds-markdown-paragraph\"><strong><span class=\"\">5. do index funds track the index perfectly ?<\/span><\/strong><\/p>\n<p class=\"ds-markdown-paragraph\"><span class=\"\">no. tracking error and expense ratios cause small underperformance.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>index funds can lose value. they track the market. market falls, fund falls. no floor. no guarantee. but it is not like a single stock. a stock can go to zero. a broad index fund cannot. the entire market would have to collapse. the risk is not total loss. it is volatility. and timing. what [&#8230;]<\/p>\n<p><a class=\"btn btn-secondary understrap-read-more-link\" href=\"https:\/\/kuvera.in\/blog\/can-you-lose-money-in-an-index-fund\/\">Read More&#8230;<\/a><\/p>\n","protected":false},"author":41,"featured_media":42019,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false},"categories":[81],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Can You Lose Money in an Index Fund? - Kuvera<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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