Can you lose money in an index fund?

Index funds are passively managed funds that replicate the portfolio of the benchmark based on a diversified portfolio. The risk of losing money in an index funds is relatively low. This is because index funds are highly diversified mirroring the underlying stock index. The top companies form the index. Such companies have a higher growth and revenue potential. It is very unlikely that the market value such companies would at once fall to zero or nil. Furthermore, an index fund is designed to be held for a long duration that may extend to 10 years in order to avoid short term market fluctuation and losing money on the investment.

Is it worth investing in index funds?

Yes, it is worth investing in Index Funds for investors who are seeking moderate returns without being exposed to a very high level of volatility. Index funds are suitable for investors wish to invest in a stock market index but do not possess the time or knowledge to manage the changing index and its weights for their investment. The index fund replicates an index and thereby replaces an investor’s efforts of continuously monitoring and revisiting portfolio.

How do you get money from index funds?

You get money from index funds in form of returns through passive investment. The fund replicates and tracks a particular stock index or benchmark comprising of large cap companies across different industries. In a way you earn returns similar to the movement of the stock index on the stock market. This is how you earn money from index funds. The low risk comes from the portfolio diversification of the selected benchmark.

How do you create an index fund?

Index funds are already created by the fund managers and investors need only to select their most appropriate one. Index funds are created by replicating the stock market index. It replicates the types of companies, their composition, proportion, weightage. Hence, the stock holding or asset allocation of an index fund is actually a proxy of the stock market index.The fund managers work on maintaining the composition of the stock market index for a well-diversified investment portfolio to secure returns to the fund investors.

How do I choose an index fund?

While choosing an index fun you need to consider a few factors. To begin with first of all make sure that index funds suit your investment goals. Index funds are suitable for investors investors who are looking to invest for the long term, ideally for retirement. These funds are also an ideal option for investors who prefer earning foreseeable returns. It is a perfect option for risk-averse investors looking for some equity exposure. The next step is to select the stock market index in which you wish to invest. Now, to select the index fund that benchmarks to the stock market index chosen by you. Further, you must consider the fund manager’s track record, historical returns, consistency of returns, relative size i.e., AUM, etc.

How long should you hold index funds?

Index Funds are more suitable for long term investments that might be extended for 10 years or longer. This was you can aim for capital appreciation in the long term and avoid volatility in the short term.

Do index funds pay a dividend?

Most index funds do not pay dividends. The ones that pay haven’t been consistent with their payouts.

Should I buy the index funds when the market is down?

For most investors, if your investment horizon is long-term, you can invest at any time. However, there is no set methodology to follow for making the investment. It is dependent on the current market scenarios. Also, the SIP route is the ideal way to invest in mutual funds. Setting up an SIP will help you invest regularly, and as a result, you do not have to worry about timing the market. You will be investing consistently, irrespective of the market movements.

What is the average rate of return on index funds?

Index funds can provide a better return over a long-term horizon as compared to the short term. The average rate of return on index funds is generally around 7-10%.

Are the lowest expense ratio index funds the best?

Yes, index funds with low expense ratios and tracking errors have the potential to generate returns close to that of the underlying benchmark index. However, you must also consider the historical performance of the fund (consistency in the returns), the fund manager’s track record, the fund’s AUM etc.

What is an SIP index fund?

SIP in an index fund refer to investing a specified amount regularly (at pre-determined intervals) in the fund. You can set your SIP frequency as daily, weekly or monthly.

Should a beginner invest in index funds?

Yes, index funds are a great investment option for beginners. If you do not understand the nuisances of the stock market and don't have the time and knowledge to track your investments, index mutual funds are the best way to start your investment journey. Since index funds replicate the portfolio of a benchmark, they have a well-diversified portfolio. And since they are managed by fund managers, you need not worry about tracking the stock performance and rebalancing the portfolio.

How to add index funds to your portfolio?

Depending on your investment goal, pick an index (benchmark) that you wish to invest in. Next, pick a fund that closely tracks the underlying benchmark. Let’s say you have a 5-year investment horizon and you wish to invest in large-cap stocks. You can pick an index fund that tracks Nifty 50 or Sensex. You must shortlist a suitable fund based on low expense ratio and tracking error, consistent performance (historical returns), fund manager’s track record, fund’s AUM, etc. Based on these factors, choose a fund and invest either through SIP or the lumpsum route (as per your requirement).

Index fund vs mutual fund - which is better?

Index funds are a type of mutual fund that represents a distinct approach to investing. While both involve pooling money from various investors to create a diversified portfolio, the key difference lies in their management strategies. Index funds passively track a specific market index, aiming to replicate its performance with minimal fees. In contrast, mutual funds employ active management, with fund managers making strategic decisions to outperform the market. Index funds generally offer lower costs and are suitable for long-term, suitable for investors seeking market returns. Mutual funds, with potentially higher costs, are favored by those seeking actively managed portfolios and potential outperformance.

Index Mutual Fund: Meaning, Types, Tax, Working, Risk & Returns

Fund name	AUM	1Y CAGR	3Y CAGR	Till Date CAGR
SBI Nifty Bank Index Fund Direct (G)	₹ 94 Cr	-	-	2.2%
Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund Direct (G)	₹ 151 Cr	7.4%	14%	15.2%
Motilal Oswal Nifty Bank Index Fund Direct (G)	₹ 593 Cr	7.8%	10.7%	12.2%
ICICI Prudential Nifty IT Index Fund Direct (G)	₹ 460 Cr	-3.7%	-	5.8%
Navi Nifty India Manufacturing Index Fund Direct (G)	₹ 48 Cr	0.6%	-	17.4%
ICICI Prudential Nifty Pharma Index Fund Direct (G)	₹ 75 Cr	7.5%	-	22.1%
Bandhan Nifty IT Index Fund Direct (G)	₹ 25 Cr	-3.6%	-	7%
Motilal Oswal Nifty India Defence Index Fund Direct (G)	₹ 2,503 Cr	-	-	-17.9%
Nippon India Nifty IT Index Fund Direct (G)	₹ 133 Cr	-3.7%	-	-9.5%
HDFC NIFTY Realty Index Fund Direct (G)	₹ 99 Cr	-11.2%	-	-7.4%
Nippon India Nifty 500 Equal Weight Index Fund Direct (G)	₹ 349 Cr	-	-	-17.9%
Navi Nifty 500 Multicap 50:25:25 Index Fund Direct (G)	₹ 20 Cr	-	-	-11.9%
Bandhan Nifty Bank Index Fund Direct (G)	₹ 14 Cr	-	-	0.3%
Axis Nifty500 Value 50 Index Fund Direct (G)	₹ 70 Cr	-	-	-9.5%
Bandhan CRISIL-IBX Financial Services 3-6 Months Debt Index Fund Direct (G)	₹ 424 Cr	-	-	0.8%
Motilal Oswal Nifty Capital Market Index Fund Direct (G)	₹ 107 Cr	-	-	-20.8%
Motilal Oswal Nifty MidSmall India Consumption Index Fund Direct (G)	₹ 14 Cr	-	-	-4.2%
ICICI Prudential CRISIL-IBX Financial Services 3-6 Months Debt Index Fund Direct (G)	-	-	-	0.6%
Nippon India Nifty Auto Index Fund Direct (G)	₹ 29 Cr	-	-	-12.8%
UTI Nifty India Manufacturing Index Fund Direct (G)	₹ 18 Cr	-	-	-2.5%

Top 10 Index Mutual Funds to invest in 2025

Below are the index mutual funds in india:

1. SBI Nifty Bank Index Fund Direct (G)

SBI Nifty Bank Index Fund Direct (G) is a Equity fund. The fund has an expense ratio of 0.2% and an AUM of ₹95 crores as of 2025-04-09. It was Launched on 2025-02-06. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 100.07% to equities and -0.07% to other assets.

2. Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund Direct (G)

Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund Direct (G) is a Equity fund that has delivered a 1 Year return of 7.4% and a 3 Years return of 14.0%. The fund has an expense ratio of 0.5% and an AUM of ₹152 crores as of 2025-04-09. It was Launched on 2020-10-26. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 100.15% to equities, 2.24% to debt and -2.39% to other assets.

3. Motilal Oswal Nifty Bank Index Fund Direct (G)

Motilal Oswal Nifty Bank Index Fund Direct (G) is a Equity fund that has delivered a 1 Year return of 7.8%, a 3 Years return of 10.7% and a 5 Years return of 24.4%. The fund has an expense ratio of 0.3% and an AUM of ₹594 crores as of 2025-04-09. It was Launched on 2019-09-06. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 100.07% to equities, 0.05% to debt and -0.12% to other assets.

4. ICICI Prudential Nifty IT Index Fund Direct (G)

ICICI Prudential Nifty IT Index Fund Direct (G) is a Equity fund that has delivered a 1 Year return of -3.7%. The fund has an expense ratio of 0.4% and an AUM of ₹461 crores as of 2025-04-09. It was Launched on 2022-08-18. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 99.93% to equities and 0.07% to other assets.

5. Navi Nifty India Manufacturing Index Fund Direct (G)

Navi Nifty India Manufacturing Index Fund Direct (G) is a Equity fund that has delivered a 1 Year return of 0.6%. The fund has an expense ratio of 0.2% and an AUM of ₹49 crores as of 2025-04-09. It was Launched on 2022-08-29. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 99.96% to equities and 0.04% to other assets.

6. ICICI Prudential Nifty Pharma Index Fund Direct (G)

ICICI Prudential Nifty Pharma Index Fund Direct (G) is a Equity fund that has delivered a 1 Year return of 7.5%. The fund has an expense ratio of 0.4% and an AUM of ₹75 crores as of 2025-04-09. It was Launched on 2022-12-14. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 99.85% to equities and 0.15% to other assets.

7. Bandhan Nifty IT Index Fund Direct (G)

Bandhan Nifty IT Index Fund Direct (G) is a Equity fund that has delivered a 1 Year return of -3.6%. The fund has an expense ratio of 0.4% and an AUM of ₹25 crores as of 2025-04-09. It was Launched on 2023-08-31. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 99.79% to equities, 0.00% to debt and 0.21% to other assets.

8. Motilal Oswal Nifty India Defence Index Fund Direct (G)

Motilal Oswal Nifty India Defence Index Fund Direct (G) is a Equity fund. The fund has an expense ratio of 0.3% and an AUM of ₹2504 crores as of 2025-04-09. It was Launched on 2024-07-03. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 99.93% to equities, 0.18% to debt and -0.10% to other assets.

9. Nippon India Nifty IT Index Fund Direct (G)

Nippon India Nifty IT Index Fund Direct (G) is a Equity fund that has delivered a 1 Year return of -3.7%. The fund has an expense ratio of 0.3% and an AUM of ₹134 crores as of 2025-04-09. It was Launched on 2024-02-22. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 99.69% to equities, 0.00% to debt and 0.31% to other assets.

10. HDFC NIFTY Realty Index Fund Direct (G)

HDFC NIFTY Realty Index Fund Direct (G) is a Equity fund that has delivered a 1 Year return of -11.2%. The fund has an expense ratio of 0.4% and an AUM of ₹100 crores as of 2025-04-09. It was Launched on 2024-03-26. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 99.28% to equities and 0.72% to other assets.

Index Funds

List of Index Mutual Funds in 2025