• Mutual Funds
  • Low Cost Index Funds in India

Low Cost Index Fund

Index mutual funds have lower expense ratio than actively managed funds. Here is a list of top 20 index mutual funds with lowest expense ratio in July 2024

Best Low Cost Index Funds to Invest in 2024

Fund NameExpense RatioCAGR till today
Navi Nifty 50 Index Fund (G)
Navi Nifty 50 Index Fund (G)
0.2616.1%
UTI BSE Sensex Index Fund (G)
UTI BSE Sensex Index Fund (G)
0.3015.4%
Axis Nifty 50 Index Fund (G)
Axis Nifty 50 Index Fund (G)
0.4215.0%
Kotak Nifty 50 Index Fund (G)
Kotak Nifty 50 Index Fund (G)
0.4515.9%
Navi Nifty Next 50 Index Fund (G)
Navi Nifty Next 50 Index Fund (G)
0.5723.8%
Bandhan Nifty 100 Index Fund (G)
Bandhan Nifty 100 Index Fund (G)
0.6117.8%
HDFC NIFTY Next 50 Index Fund (G)
HDFC NIFTY Next 50 Index Fund (G)
0.6621.6%
Edelweiss Nifty Large Mid Cap 250 Index Fund (G)
Edelweiss Nifty Large Mid Cap 250 Index Fund (G)
0.7420.4%
HDFC Nifty 100 Index Fund (G)
HDFC Nifty 100 Index Fund (G)
0.7517.7%
SBI Nifty Next 50 Index Fund (G)
SBI Nifty Next 50 Index Fund (G)
0.7824.0%
Edelweiss Nifty Next 50 Index Fund (G)
Edelweiss Nifty Next 50 Index Fund (G)
0.7937.1%
Navi Nifty Bank Index Fund (G)
Navi Nifty Bank Index Fund (G)
0.7913.7%
HDFC Nifty 100 Equal Weight Index Fund (G)
HDFC Nifty 100 Equal Weight Index Fund (G)
0.8023.3%
Axis Nifty Next 50 Index Fund (G)
Axis Nifty Next 50 Index Fund (G)
0.8325.9%
Edelweiss Nifty Smallcap 250 Index Fund (G)
Edelweiss Nifty Smallcap 250 Index Fund (G)
0.8444.4%
HDFC NIFTY50 Equal Weight Index Fund (G)
HDFC NIFTY50 Equal Weight Index Fund (G)
0.8619.9%
Nippon India Nifty Alpha Low Volatility 30 Index Fund (G)
Nippon India Nifty Alpha Low Volatility 30 Index Fund (G)
0.8731.4%
ICICI Prudential Nifty Bank Index Fund (G)
ICICI Prudential Nifty Bank Index Fund (G)
0.8718.6%
ICICI Prudential Nifty Smallcap 250 Index Fund (G)
ICICI Prudential Nifty Smallcap 250 Index Fund (G)
0.8923.7%
ICICI Prudential Nifty IT Index Fund (G)
ICICI Prudential Nifty IT Index Fund (G)
0.8913.3%

Note : *NA implies that Fund is relatively new. Not enough data available

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Low-Cost Index Mutual Funds offer a passive investment approach, tracking a specific market index, and have become a preferred choice for many investors. In this article, we will explore Low-Cost Index Funds in India, including what they are, how to invest in them, the returns they offer, and the reasons to consider them as part of your investment portfolio.

What are Low-Cost Index Funds?

Low-Cost Index Funds are a type of mutual fund that aims to replicate the performance of a specific market index, such as the Nifty 50 or the Sensex. Index funds follow a passive investment strategy, unlike actively managed funds, which rely on fund managers to pick and choose individual stocks. This means that the fund’s portfolio mirrors the composition of the chosen index, offering investors broad market exposure.

The term ‘low-cost’ refers to the minimal fees associated with these funds. Since index funds don’t require active management decisions, the expenses are significantly lower compared to actively managed funds. This cost efficiency makes Low-Cost Index Funds an attractive option for those looking to maximize returns without incurring high fees.

How to Invest in Low-Cost Index Funds?

Investing in a Low-Cost Index Fund in India is a straightforward process. You can invest either through the offline or online route. For offline, you will have to submit the investment form at the fund house office or find an agent to do it for you. On the other hand, you can invest in low-cost index funds from the comfort of your home. Directly invest from the asset management company’s website or through online platforms that enable mutual fund investing. Here are the key steps to get started:

  • Research and Select an Index Fund: Conduct thorough research to identify the index fund that aligns with your investment goals. Popular indices in India include Nifty 50, Sensex, and Nifty Next 50.
  • Choose a Reputable Fund House: Opt for a well-established and reputable mutual fund house to ensure reliability and transparency. Some of the prominent fund houses in India offer a range of Low-Cost Index Funds. Pick funds with a low expense ratio and consistent track record.
  • Complete the KYC Process: Fulfill the Know Your Customer (KYC) requirements by submitting the necessary documents to the fund house or the KYC registration agency.
  • Invest Through a Systematic Investment Plan (SIP) or Lump Sum: Decide whether you want to invest through a SIP, which allows regular investments, or through a lump sum investment, where you invest a larger sum at once.
  • Monitor and Review: Keep a close eye on your investments and periodically review the fund’s performance. Adjust your investment strategy as needed based on your financial goals.

How to invest in index funds?

Return on Low-Cost Index Fund

One of the primary attractions of a Low-Cost Index Fund is the potential for competitive returns. These fund returns are quite close to that of the underlying benchmark’s returns. While they may not outperform the market, they aim to replicate its performance. Historically, index funds have demonstrated consistent returns over the long term, making them an appealing option for investors seeking stability and gradual wealth accumulation.

It’s important to note that the returns on Low-Cost Index Funds are closely tied to the performance of the underlying index. You should have a realistic expectation of market returns and understand that the fund’s performance will mirror the ups and downs of the broader market. Also, when picking a fund, it’s best to opt for the lowest expense ratio index funds in India. However, there are other parameters that you should be considering. Consider other factors like consistency in performance, fund manager’s reputation, AUM size, etc. 

Why Invest in Low-Cost Index Funds?

The following are the reasons why Low-Cost Index Funds are an attractive investment option:

  • Cost-Efficiency: As the name suggests, low-cost index funds have minimal expenses compared to actively managed funds. This cost efficiency allows you to retain a higher percentage of your returns.
  • Diversification: Index funds provide instant diversification as they mimic a broader market index, including a basket of stocks from various sectors. This diversification helps mitigate the risk associated with investing in individual stocks.
  • Long-Term Growth: Index funds are designed for long-term investors. By holding a diversified portfolio of stocks, you can benefit from the overall growth of the market over an extended period.
  • Passive Management: The passive investment approach of index funds eliminates the need for continuous monitoring and decision-making by fund managers. This approach may suit those who wish to invest and not worry about regularly tracking their investments.

Conclusion

Low-cost index funds in India present an investment option for those seeking a cost-effective and passive approach to wealth creation. By understanding the basics of these funds, you can make informed decisions that align with your financial goals and risk tolerance and generate significant returns in the long term.

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