InvestmentFinancial Glossary
Index Fund
Definition
A mutual fund that replicates the portfolio of a specific market index (Nifty 50, Sensex, Nifty 500, Nifty Next 50) by holding the same stocks in the same proportion. Index funds are passively managed, meaning no fund manager makes active stock selection decisions, resulting in very low expense ratios (0.1-0.3%).
Why It Matters
SEBI data shows that over 5-year periods, 60-70% of actively managed large-cap funds fail to beat the Nifty 50 after fees. This has driven a massive shift toward index funds in India. For most investors, a Nifty 50 or Nifty 500 index fund via SIP is the simplest, lowest-cost path to long-term wealth creation.