How to choose the best or top Index fund?
Choice of the index fund should largely be based considering the 2 aspects:
1. Low expense ratio: The expense ratio is charged from investors for management of the fund and other fee etc.
2. Tracking error: This is any deviation in the fund’s return from the index return. Say there is one index fund A and another B, for index fund A- tracking error is 0.75% when compared to the benchmark and while it is 0.25% in the case of Index fund B. Then in such a situation one should definitely be opting for an index fund that has a lower tracking error or deviation from benchmark returns.
How to invest in index funds?
For investing in index funds in the case of which you can even start a SIP, STP etc. there is no requirement of having a demat account. This is true of open ended index funds and the same can be invested into via the company’s or AMC’s portal directly.
Top Index Funds With Lowest Expense Ratio:
It is to be noted that as discussed above tracking error is another important metric that investors cannot and should not overlook when betting on index funds, as closer the index fund to the index in terms of return, the more profitable shall be your investment. For now we are considering some of the top index funds that you can consider for investment basis low expense ratio. Note we are typically considering index funds that command a fund size of over Rs. 1000 crore.
|Fund||Expense ratio||Absolute returns 1 year in %||Absolute returns 3 yrs in %||Absolute returns 5 yrs in %|
|UTI Nifty Index fund- Growth||0.29%||57.04||50.14||101.31|
|HDFC Index Fund- Nifty 50 Plan||0.40%||56.66||49.06||99.54|
|HDFC Index Fund – Sensex Plan||0.40%||53.94||50.3||103.32|
|Edelweiss NIFTY PSU Bond Plus SDL Index Fund 2026 – Regular Plan – Growth||0.31%||NA being a new fund|
1. UTI Nifty Index fund- Growth:
The new risk-o-meter suggests the fund to carry moderately high risk. Nonetheless, it is a CRISIL 3-star rated fund that signifies average performance among peers. Fund size is Rs. 3669 crore and NAV of the fund as on June 11 is 104. This fund carries an expense ratio of 0.29%.
1-year return from the fund is 57.03 percent against Nifty 50 TRI of 57.42%, suggesting a low tracking error during the period.
Top holdings of the fund include RIL, HDFC Bank, Infosys, HDFC, ICICI Bank, TCS, Kotak Mahindra etc.
2. HDFC Index Fund- Nifty 50 Plan:
This is again a 3-star CRISIL rated fund with an asset size of Rs. 2928 crore. Risk-o-meter for the fund suggests it to be a moderately high risk bet. NAV of the fund as on June 10 is 144.5. In comparison to the Nifty TRI of 57.42% over a period of 1 year, the fund has offered a return of 56.66%. SIP investment into the fund can be started for as less as Rs. 500.
Top holdings of the fund include RIL, ICICI Bank, HDFC Bank, HDFC, Infosys, TCS, Kotak Mahindra and HUL among others
3. HDFC Index Fund – Sensex Plan:
This is again a 3-Star CRISIL rated fund. Against the benchmark SENSEX TRI of 54.7% return in the last one year, the fund has yielded return of 53.94%. Asset size of the fund is Rs. 2210 crore.
Top holdings of the fund include RIL, HDFC twins, ICICI Bank, Infosys, TCS, Kotak Mahindra Bank etc.
4. Edelweiss NIFTY PSU Bond Plus SDL Index Fund 2026 – Regular Plan – Growth
The fund is not rated by CRISIL and carries a moderate risk. The expense ratio of the fund is 0.31%. The assets under management of the fund are to the tune of Rs. 1362 crore. NAV was quoting at 10.33. The fund has over 96 percent corpus into debt securities. Notably it is a newly launched index fund that came up in March 2021
Given the recent traction in mutual fund investment category and the record highs the benchmark indices in India are hitting, index funds can be the safest route to gain exposure to equity markets. In fact experts suggest an allocation of between 5-10% in Index fund in one’s mutual fund investment mix.
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