Index Funds: The Smart Investor's Guide to Passive Wealth Creation
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What Are Index Funds? Index funds are a type of mutual fund or exchange-traded fund (ETF) designed to mirror the performance of a specific market index, such as the NIFTY 50 or the S&P 500. These funds invest in the same stocks that constitute the index, ensuring broad market exposure and minimizing the need for active management. How Do Index Funds Work? Unlike actively managed funds, where fund managers pick and choose stocks, index funds follow a passive investment strategy. The fund's portfolio composition changes only when the underlying index undergoes modifications. This reduces trading costs and makes index funds an efficient, low-cost investment option. Benefits of Investing in Index Funds Benefits of Index Funds: Lower Expense Ratios: Since they're passively managed, index funds typically have significantly lower expense ratios compared to actively managed funds. This means more of your investment returns stay in your pocket. Expense Ratio = Total Fund Assets / ...