What is index funds?
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Index Funds are mutual funds that imitate popular market indices. They are passively managed funds, i.e., fund managers do not actively select the stocks. Instead, they simply invest in the stocks that make up an index (Sensex, Nifty, etc.). Basically, the fund manager mirrors the stocks under a particular index and tries to always keep the fund’s portfolio in line with the index, hoping to reproduce the returns of that index. For instance, an Index Fund that follows the Nifty will invest in the same 50 stocks listed under the index and in the same proportions as well.