Index Funds |
| Credit: Tradehint |
MEANING
• Index fund is a kind of mutual fund designed to show the composition and performance of the Financial Market Index
• Index of Bombay Stock Exchange (BSE) is Sensex and the Index of National Stock Exchange is Nifty
• It seeks to track the return of the Market Index. A Market Index is a representation of securities of a sector in an economy
HISTORY OF INDEX FUNDS
• The first Mutual Fund was launched in the USA. They are very popular in the USA
• The first Index Fund was launched by Mr. John Bogle, Founder of the Vanguard Group in 1976
• The name of the fund was Vanguard S&P 500 Index Fund. The issue size was $150 Mn and raised just $11.3 Mn
INDEX FUNDS V/S ACTIVE FUNDS
• The cost of an Index Fund is less than active funds. The cost of Index funds is low because they benchmark index are replicating the
• The Index does not need any additional services but active funds need the services of research analysts who assist in the in stock selection process
• Index Funds seek market average returns while active mutual funds outperform the market try to
• Index Funds performance is relatively predictable over time, active mutual fund performance tends to be much less predictable
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