Best Index funds to invest in 2024

If you are bullish about the overall economy or a sector in the long run but you are unable to have faith in any particular mutual fund scheme, then an index fund could help you out. If you are wondering how so, read the rest of the article! We will not only tell you why index funds are suited to your needs but will also give you a list of the best index funds of 2024 in India where you can invest. 

List of Best Index Funds to Invest in India in 2024

Note: All the figures are as of January 3, 2024. The funds have been chosen based on their 5-year CAGR.

1. DSP Nifty 50 Equal Weight Index Fund

It is an open-ended equity index fund aiming to replicate the performance of the Nifty 50 Equal Weight Index. As of January 3, 2024, the AUM is around ₹862.84 crore.

2. Bandhan Nifty 50 Index Fund

Earlier offered by IDFC mutual fund, it is now offered by the Bandhan AMC. As of January 3, 2024, the AUM is around ₹1,001.98 crore.

3. UTI Nifty 50 Index Fund

This fund, offered by UTI Mutual Fund House, tries to capture the performance of the most liquid stocks belonging to some of the largest Indian companies. As of January 3, 2024, the AUM is around ₹13,626.63 crore.4. ICICI Pru Nifty 50 Index Fund

This fund is offered by the ICICI Prudential Mutual Fund. As of January 3, 2024, the AUM is around ₹5,732.85 crore.

4. Nippon India Index Fund-S&P BSE Sensex Plan

Earlier managed by the Reliance Mutual Fund, this fund is now operated by the Nippon India Mutual Fund. As of January 3, 2024, the AUM is around ₹578.60 crore.

Get the full list of Top Index Funds in 2024!

What Are Index Funds?

As the name suggests, index funds invest in stocks that constitute the benchmark indices like NIFTY 50 and Sensex. The main aim of the fund is to replicate the performance of the index by mirroring the list of stocks and their proportion. Since the fund simply mirrors an existing index, there is very little requirement for adjustments or further research. Hence, index funds are not actively managed by the fund managers. As a result, the expense ratios of index funds also tend to be lower than actively managed funds.

Index Funds Vs Actively Managed Funds

The following are the different ways in which index funds are different from actively managed funds.

Investing in index funds makes sense if it is hard to find actively managed funds that provide you with higher returns. Some actively managed funds may give you a higher return on paper. But they may still provide you with less net profit as a large part of the returns may have to be paid off as a part of the high expense ratio.

Investment in Individual Company vs Sector 

In actively managed funds, there can be the issue of the companies in the portfolio losing market share and revenue to a competitor despite an increase in the overall market size. 

For example, assume there is a sector ‘S’ that is growing at 20% CAGR. Sector S is composed of 2 companies, A and B, with equal revenue in the beginning. Now, in the following months, A ends up losing revenue because of losing market share to B. 

In this scenario, if yours is an actively managed equity fund, you may have been invested in A and not B. Then, your investment may have faced losses. On the flip side, if you had chosen B, your investment would have made gains that are likely higher than the overall market gain, as the market’s gain covers the gains and losses of both A and B and is thus an average of the two. On the other hand, if you were invested in an index tracking sector S, across both A and B, you do not have to worry about which of A or B is the one making gains as long as the overall sector S is growing. 

Therefore, being invested in a sector may reduce the overall risk of your portfolio through diversification across companies in the sector or the economy. Moreover, if the index includes only those companies that are more secure or have stable growth, then your chances of making stable returns are higher. It is up to you which sector you want to bet on, given your desired level of returns and risk tolerance.

Benefits of Investing in Index Funds 

There are several key benefits of investing in index funds.

• Low fees

It is a passive mutual fund investment and follows the benchmark. It doesn’t need active market research. So, the cost of investing in index funds is low.

• No bias investing 

Index funds follow a clear, transparent and unbiased investment method which eliminates scopes of emotional biases and judgemental errors. 

• Broad diversification 

Index funds invest in a diversified portfolio spread across sectors and companies. Funds following NSE NIFTY invest in fifty company stocks following the index.

• Tax benefits  

Fund managers place few trades in a year, resulting in restricted capital gain. It leads to less capital gain tax.

• Easier to manage

Since these funds don’t require active management, index funds are easier to manage. The fund manager must only rebalance the fund as and when needed.

Know More About What is Expense Ratio in Mutual Funds?

Conclusion 

These are the best index funds in 2024. Index funds replicate the returns of the major market indices and, therefore, are less risky than stock investment. If you want to perk your funds in a mutual fund that generates competitive returns without increasing risk exposure and doesn’t require active monitoring, index funds are better options. Invest in the best index funds with Angel One. Open your free Demat account today!

Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.