What is difference - Mutual Funds vs Index funds?
Short Answer
The differences between index funds and mutual funds are vast. Learn what is mutual fund and index fund and know what differentiates the two investment options.
Detailed Answer
Index funds or Index mutual funds are essentially mutual funds in which investments are made in stocks which track a particular index in the stock market.
An index like Nifty 50 or BSE 100. So in a way, they replicate underlying Index.
Differences Between Mutual Funds and Index Funds:
- Index funds can generally come in two forms Index mutual funds or ETFs.
- Index mutual funds are simply mutual fund schemes whose mandate is to invest in underlying index stocks. So, in a way it is a passive investment in underlying index.
- Similar to Mutual funds, Index mutual funds have a daily NAV and can be brought or sold to the Fund house.
- Mutual funds, on the other hand, depending on it stated scheme goals have greater flexibility in changing their portfolio. Hence, these are actively managed funds.
- ETF ( Index funds) track one of the stock indices and are actively traded on the exchange. The price of ETFs hence varies dynamically. ETFs can be bought and sold on the exchange.
Mutual funds vs Index Funds: Conclusion
- Actively managed equity portfolios tend to outperform passive index funds.
- Outperformance can vary over time period and decreases with large time intervals.
So, for now it may be worth paying higher expense ratio for actively managed mutual funds. Since, actively managed mutual funds end up giving better returns.
What is difference between Fixed Deposit vs Mutual Fund? Meaning Fixed Deposit (FD) are saving tools offered by banks to deposit lump sum amount for a fixed period of time on a higher interest rate than saving accounts. Mutual funds are investment products which pool money from numerous small investors to create a fund.
What is difference between Mutual funds and Hedge funds? In a way, there are a lot of similarities between Mutual Funds and Hedge Funds. In the both types of investments, a group of investors pool their money and invest in different type of securities. The main misconception about the funds is that people think that they are similar and the terms are interchangeable. In reality, they are not same and there is a very thin line between them.
What is the difference Liquid funds vs. Savings accounts? Based on return liquid funds outperform savings account by anything between, 2-4 % points which is 50-100 % higher return than the savings account. So, purely on the basis of returns investing in liquid funds seems a better option.
Which is better FD vs. Mutual Fund vs. Real Estate Investment? FD vs Mutual Fund vs Real Estate Investment has its advantages in terms of how much you invest and your investing period. Longer the period, higher the returns.
How to Invest in Index Funds in India? There are several options to invest in index funds. It can be done through online portals, agents, demat account and AMC website.
What are Index Funds? Meaning, Advantages, Review, Taxation Index funds are mutual funds in which investment are made in the stocks of Index they track such as Nifty, Sensex according to its composition and weightage of the index.
What are Mutual funds serviced by Karvy? Complete list Karvy has gradually grown as one of the largest Mutual Fund RTA companies after being established in 1982. One of the main strengths of a Mutual Fund RTA is the facility to offer a wide range of Mutual Funds to the investors in one place.
What is Mutual Fund? Meaning A Mutual Fund is an expertly overseen speculation subsidize that pools cash from a few speculators to purchase protections. These financial specialists could likewise be retail or institutional in nature.
Are market highs good to invest in Equity mutual funds? Understanding the relative position of the market, the absolute values do not matter much. What matters is what is the earnings multiple, currently the market is trading at, popularly captured by a metric called P/E ( Price to earnings).
Who is the Mutual Fund Regulator in India? Mutual funds are regulated by SEBI ( Securities and Exchange Board of India). SEBI regulates mutual funds as 1996 Mutual fund regulation. SEBI is also the regulator for wider capital and securities market in India. SEBI was formed in 1988 as a statutory body and drives it powers from SEBI act 1992.