7/5/2023 0 Comments Nifty 50 index![]() ![]() When you invest in an index fund, the fund manager of that index fund uses your money to invest in stocks in the same proportion as the index that he is tracking.įor example, a NIFTY Index Fund invests in stocks of companies comprising the NIFTY 50 Index in the same proportion and aims to achieve a return equivalent to the NIFTY 50 Index. follow this strategy and are examples of passively managed Mutual Funds. Index Funds that replicate specific indices like the NIFTY 50, NIFTY Midcap 150, etc. Instead, they can only replicate the portfolio of the chosen index. So, unlike active investing, the fund managers engaged in passive investing are not free to pick and choose stocks to invest in. In passive investing, the Fund Manager builds a portfolio of stocks and maintains individual stock allocations in the same proportion as the index being replicated. This style of investing often involves multiple buy and sell transactions, so, is called active investing, and schemes implementing this strategy are called actively managed mutual funds. The fund manager and his/her team take tactical calls including which stocks to buy or sell and at what price. ![]() In an actively managed Mutual Fund, you invest your money in a scheme and then an expert called the Fund Manager uses his or her expertise to build a portfolio of securities. In order to better understand how Index Funds work, let's discuss what active management and passive management mean in the case of Mutual Funds. To replicate the performance of its chosen index, Index Funds hold the shares that comprise the chosen index in the exact same proportion as the index being replicated. An index fund is a type of passively-managed mutual fund that tracks and attempts to replicate the performance of a market index such as the NIFTY 50, NIFTY Next 50, Sensex, etc. ![]()
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