RIDING THE INDEX

AS INVESTORS GRAPPLE WITH A VOLATILE LANDSCAPE, PASSIVE FUNDS ARE PROVING INDISPENSABLE TO GET MARKET RETURNS FROM A DIVERSIFIED SET OF STOCKS AT A VERY LOW COST

- BY ANAGH PAL

What he meant is simple. Instead of trying to pick individual winners and looking to beat the market, own the entire market through index funds.

Mumbai-based Parth Parikh, 37, who works in the fintech and investment space, seems to have heeded that advice. He keeps a core part of his portfolio in broad market exchange-traded funds (ETFs) like S&P 500 ETF, Nasdaq 100 ETF, and even some exposure to Vanguard Total World Stock ETF.

Parikh’s is not an isolated view. Index funds and ETFs have assets of over ₹12 lakh crore in India and have grown to account for 17% of the total mutual fund industry.

Basics First

Stay Calm Amid SwingsVolatile markets make emotional decisions costly; passive strategies help you stay on track

Cut Costs, Keep ReturnsLow-fee index funds and ETFs maximise gains even when expenses rise

Diversify Without StressSpread risk across sectors and stocks without constant monitoring

Long-Term GrowthConsistent, hands-off investing benefits from compounding over time

Leverage TechnologyRobo-advisors and digital platforms make investing simple, fast, and automated

In fact, though passive products have been in India for nearly 25 years, they have seen exponential growth in the past five years. In 2020, index funds had AUM of ₹8,000 crore. Today, it is ₹1.5 lakh crore. ETFs have grown tenfold in the same period. It’s clear that retail and institutional investors alike have jumped on the passive bandwagon.