2 months, 1 week ago

How to choose the best index funds for your investment? Expert shares 3 strategies for building a winning portfolio

Index funds are mutual funds that invest in various stocks within a specific market index. Shaily Gang, Head of Products at Tata Asset Management, explains how indices are constructed and offers three key principles for choosing the right funds: aligning with your risk tolerance through strategic and tactical allocation, minimising tracking errors and expenses, and considering the fund's asset size. Large-cap or flexi-cap market exposure indices Bullion indices Factor indices with a smaller universe Broad thematic funds Investors fine with higher-risk reward avenues, may look at the following under the Tactical bucket. More narrowly focused thematic index funds Factor indices focused on mid-and small-cap stocks. 2) Choose index funds with low tracking difference, low tracking error and low expense ratios Investors should know that an index fund's performance won't perfectly mirror its index.

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