Are you a first-time investor looking to maximise the returns but want to keep the cost low? The investing process may seem challenging and overwhelming, especially for beginner investors. One of the best choices is to start your investment journey by putting your money index mutual funds. It’s a cost-effective investment option, specially made for those who want to earn stable to high returns in the long run but have a low-risk appetite.
This article explores index funds and their benefits and discusses the steps to building a low-cost, high-return investment portfolio with index funds.
Understanding the Index Mutual Funds
Index funds are investment funds that track a specific market index, such as the Nifty 50 or Sensex, and imitate its performance. Instead of relying entirely on professionals, these funds mirror the performance of the index and allow investors with low-risk profiles to earn stable returns in the long run.
Why Choose Index Mutual Funds:
- Lower Fees: Index funds include low management fees and are a cost-effective way to earn good returns.
- Diversification of Portfolios: Index funds help users diversify their portfolios by investing their money in various companies and sectors.
- Consistent Performance: Index funds provide stable and long-term growth to investors.
- Simplicity: Investing in index funds is quite simple, as you don’t have to do deep research or predict market movements.
Steps to Build an Index Fund Portfolio
Follow the steps mentioned below to build a low-cost and high-return portfolio with an index mutual fund:
- Analyse Your Investment Goals: Before making any investment choice, make sure you are well aware of your investment goals, whether you are creating wealth for retirement, a child’s education, or buying a house. This will allow you to choose the right index fund.
- Choose the Type of Index Funds: Your choice of index funds depends on your risk tolerance, market conditions, and financial goals.
- Broad Market Index Funds imitate the performance of a stock market index and offer opportunities to invest in top companies.
- Sector-Based Index Funds: As the name suggests, these funds offer investors opportunities to invest in different sectors, such as healthcare and banking.
- International Index Funds: Those who want to invest in global markets can choose international index funds.
- Plan Your Investment: It is necessary to make a plan of your investments to assess how much you need to invest and the frequency of investments to fulfil your financial goals. You can use an MF calculator to determine the returns on the basis of your investment amount, tenure and expected rate of return. This will help you know which asset to invest in based on your risk tolerance and goals.
- Choose SIPs: SIPs or Systematic Investment Plans allow users to invest a fixed amount monthly, yearly or quarterly and help develop disciplined habits. While investing, you can even make adjustments to your payments according to your financial situation.
- Start Investing Regularly: Once every decision is made, you can now start investing your sum in an index mutual fund and make sure to stay consistent and disciplined. Also, regularly monitor and track your portfolio to ensure it aligns with your goals and make adjustments wherever needed.
Conclusion
It is concluded that investing in index funds is a good, cost-friendly choice for many. Beginners with low-risk appetites looking for a cost-effective option to invest and earn good returns must choose index funds.
Be sure to opt for a trusted mutual fund app like Bajaj Finserv to make investments safely, diversify your portfolio, and earn high returns. So, don’t wait; start investing today, stay consistent, and make the right choice to achieve your investment goals.
