Have you ever had the chance to make a ready-to-eat meal, where all the ingredients are in perfect harmony, waiting for your Michelin level microwaving skills? The concept of an index fund is close. A fund manager invests assets into stocks in proportions already defined in pre-established indices.
A ready-to-consume investment instrument sounds interesting? Let's dive a bit deeper into this topic.
These are passively managed funds that invest in stock to mimic the movement of market indices. The fund managers don't cherry-pick the stocks but rather plainly invest in all the stocks in the index in varying proportions.
That was a quick and short blog on Index funds. Remember, the ready-to-eat packets are quick and easy to make but can be real disappointments when they do!
We'll be back with another recipe...blog...another blog. Till then, Stay Safe! Invest Safer!
Ans. Indices are created by a bunch of similar companies in terms of industry, market capitalisation amongst other things.
Ans. These funds are usually taxed like equity funds unless they consist of foreign equity or debt instruments in which case they are taxed like debt funds.