Considering that Stock Market Indices are methodically calculated to reflect the best in each category, the following index funds can be considered from a 5-10 years perspective. These funds are available with several Asset Management Companies in India.
Sensex Fund
Nifty 50 Index Fund
Nifty Next 50 Index Fund
The allocation to Index Funds, Exchange Traded Funds and other passively managed funds has grown in the past few years. Currently the share of passively managed funds as a percentage of the Total Assets Under Management (AUM) of Mutual Funds industry in India is 25%. It has grown from 16% last year. In developed markets such as the US, the share of passively managed funds in the overall AUM is over 50%.
The main advantage of Passively Managed Funds is the low Expense Ratio and a scientifically designed Index. It should be noted that currently only the large cap Indices are doing well. It is better to opt for Actively managed funds for the mid cap and small cap categories. Stock selection still plays a very important role in the mid cap and small cap categories. In the large cap category it is becoming increasingly difficult for fund managers to beat the Index.
While investing, lumpsum investments should be avoided. SIPs and STPs should be used to invest except when markets are at record low levels. The current phase is not a good time to invest further in my opinion but investors should continue with their ongoing SIPs.
It can also be a good strategy to take Cash calls and maintain an allocation of 20%-25% to Cash and Liquid Funds at any point in time to take advantage of Market Crashes. Market peaks such as the current one should be used to book some profits and rebalance your portfolio.
If you have not yet designed a Financial Plan for yourself, it will be a good idea to do so.
Mungekar Wealth 