Index Funds

The Securities and Exchange Board of India (SEBI) played a pivotal role in the rise of the capital markets of India. SEBI's role for the development of the mutual fund industry of India was exemplary.

Today, the Association of Mutual Funds of India (AMFI) operates in accordance with the laid down guidelines of SEBI. Formation of index fund was conceptualized and rationalized by AMFI to direct investment for specific index.

Definition and features of the Index Funds:

The Index funds are those types of funds which accumulates stocks of each and every company that make up a particular index. The performance of the Index fund thus depends on the performance of that particular index. Investments in Index funds are cheaper and are regarded as passive form of investments.

Another advantage of investing in the Index funds is that their values are so high that most of the other funds fail to supersede the value of the Index funds. The most popular type of Index funds is the Standard & Poor's 500. Investments in index funds are subject to income tax exemptions.

Advantage of Index Funds

Index Funds are advantageous for risk-averse investors. The various advantages of Index Funds are -

• Low transaction costs
• Low expense ratio
• Less risk
• Low dependence on performance of fund manager.

To knoe more about Classification of Mutual Funds click on the following links:

Last Updated 06/30/2011

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