Index funds are a kind of Mutual funds where portfolios are designed for tracking the performance of a particular Market Index (particular segment of market). Here the Market exposure is broad, while Operating Expenses and portfolio Turnover both are low. Stocks having similar characteristics such as the size, value, profitability and/or geographic location of the companies are grouped together in Index Funds. They are suitable for Investors having capability of bearing low risk.
There are two types of Index Funds –
Advantages of investing in Index funds: