An index fund is a type of mutual fund that tracks and attempts to replicate the performance of a market index such as the NIFTY 50, NIFTY Next 50, Sensex, etc. . Index funds invest in the same stocks and at the same weightage as the underlying index, and their primary goal is to replicate a stock market index. They are passively managed funds, which means that the fund manager invests in the same securities as present in the underlying index in the same proportion and doesnt change the portfolio composition.

In India, index funds are gaining popularity because they offer a number of benefits over more traditional actively managed funds. Here are some reasons why index funds in India are gaining popularity:

• No Fund Manager Bias: Since index funds are passively managed, there is no fund manager bias, which means that the fund manager does not have to make any investment decisions. This reduces the risk of underperformance due to poor investment decisions by the fund manager.

• Lower Expense Ratio: Index funds have lower expense ratios compared to actively managed funds. This is because index funds do not require a lot of research and analysis, which reduces the cost of managing the fund.

• Diversification: Index funds provide diversification by investing in a basket of stocks that represent the underlying index. This reduces the risk of investing in a single stock.

To invest in an index fund, one needs to decide where they want to invest and then look for funds that track that particular index. Among the options, one should go with the one with the lowest expense ratio.