[ad_1]
Index Fund: Choosing a good mutual fund is not a big deal. But choosing on your own, without anyone’s tip, is a big deal. Today I am going to make this problem very easy for you. It is a must read especially for those people who want to invest their hard earned money somewhere. Since I recommend every new investor to invest in index funds only. Mark my words, ‘new investor’.
Why is it better to invest in index funds?
There are two types of funds. One is Active Mutual Fund and the other is Passive Mutual Fund. We also call the second fund as index fund. Index funds do not have a fund manager, so you do not have to pay broker’s charges like other funds. This is very beneficial for new investors. But if you want to generate alpha in your fund. And if you want to beat the market and get good returns, then you can choose funds other than index funds. But as I said, index funds are the best investment option for new investors in the initial stages.
Why index fund is better than other funds?
You must have heard the name of Warren Buffett. He is the biggest investor in the world. Older in age and older in terms of money. Warren Buffett, 92, started investing at the age of 11. After many years of experience, he has considered index funds better than other funds and this has proved to be true for our India as well.
How did people make money during Corona?
You can understand this with an example. Due to Corona, in March 2020, the Nifty-50 fell below its lifetime high i.e. around 12,350 and reached the level of 7,500. At this time, if anyone had invested money in index funds when the market fell, then his money would have doubled in just two and a half years. Today the market is at the level of 17.5 to 18 thousand for a long time. This is also a good time when you can start investing money in a good index fund.
How to choose a good index fund?
Before choosing any fund, it is very important to understand some basic things. For example, how risky is the fund in which you are going to invest, what is its Standard Deviation, how much alpha it generates, what is the Beta of that fund, what is the Sharpe and Sortino Ratio…etc..etc. ..Now you will say, what are these mind boggling things you are talking about. To avoid all these things, I have told you the way of Index Fund. However, to start investing in index funds as well, you need to understand the difference between the two index funds. So now I am going to make that difference to you in a very easy way.
Find out by watching Std Dev, how risky is the fund?
There are many such sites where if you just write the name of the fund, then all the information about it will come in front of you. The most important of them. Standard Deviation which is also known as Std Dev in short form. Since we are talking about index funds here. In this case its benchmark is S&P BSE 100 TRI only. Do not be afraid of this English word. When you open the site, this benchmark will be written below your index fund…so that you can compare your funds. In how many years your chosen fund has given returns, it will be clearly known. Std Dev means that how volatile (risky) the fund you are going to invest is. If the value of your fund is seen around its benchmark, then it is correct. This means the performance of the fund you are going to choose is in line with its benchmark. If this value is high, it means that your fund is slightly more risky. And if this value is less then it means that the fund you have chosen is less risky. Apart from this, you can also invest by looking at the returns in terms of short term and long term. Rest of the ratios will be discussed later.
How to invest after choosing an index fund?
To eliminate this problem of when and how you have to invest in index funds in the market, I have already explained the complete method in this article. To read it, click on the link given below and start your investment journey on a bright note.
read this also: What is the ‘Blast Lumpsum’ Technique? With its help, investors in the stock market become juggernauts; Warren Buffett is also its fan
[ad_2]
Source link