8.33Index funds (as a category)
1What is it?
Index funds replicate an index: Nifty 50, Nifty Next 50, Sensex, Nifty Midcap 150 and more.
2Why does it exist?
Low-cost, simple core building blocks.
3Diagram
| Invests in | Suits | Risk | Suggested horizon |
|---|---|---|---|
| Index constituents | Everyone, especially beginners | Market risk of that index | 5+ years |
4Quick revision
- Index funds replicate an index: Nifty 50, Nifty Next 50, Sensex, Nifty Midcap 150 and more.
- Risk: Market risk of that index.
- Horizon: 5+ years.
5Knowledge check
Q1. Does an index fund reduce market risk?Show answer
No, it carries the risk of the index it tracks.
Q2. Main advantage?Show answer
Low cost and simplicity.
Q3. Example?Show answer
UTI Nifty 50 Index Fund.
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