Question

What are Index Funds?

Answer 1

hope this will help you

Answer 2

Index funds, as the name suggests, invest in an index. These funds purchase all the stocksin the same proportion as in a particular index. This means the scheme will perform in tandem with the index it is tracking, save for a small difference known as tracking error.

Well, it is true that the fund manager in an active fund tries to earn extra returns over the benchmark index through active stock picking. However, many studies abroad have successfully proven that it is almost impossible to beat the benchmark index year after year.

Unlike actively-managed funds, index fundspassively track the performance of a particular index. These funds are not meant to outperform the market, but mimic the performance of the index.