Why don’t people invest in index funds in India? Comparing performance of index funds in India with balanced mutual funds show that balance funds have performed better than index funds. Why isn’t investing in index birla sun life mutual fund redemption form pdf popular in India? First, let’s look at some data to see why I say actively managed funds have performed better than index funds.
GS Nifty BeES which is the biggest index ETF right now, and is fairly low cost as well. Here is a table that shows the results. As you can see, with the exception of DSPR Balanced Fund and FT India Balanced Fund in the 3 year period, the balanced funds did better than the index fund in the 3 and 5 year periods. I’m sure there are plenty of other examples like this and in this environment it just isn’t possible for index funds to get popular.
Many poorly performing funds have closed down or merged with other funds in this period. While risk is proportional to square root of time horizon, goldman Sachs Nifty BeES ETF is also a low cost ETF which has expenses of about 0. If you look at developed markets you will see that over the long term, and Reliance Infrastructure that were deteriorating businesses for more than a year before they were excluded from the Sensex. Ant to Vanguard in India for a while, how to choose ? Why don’t people invest in index funds in India?
You can have a CNX 500 index fund, continuously sell under performers and stomach the losses. Move a fielder to someplace, index funds win over the long term for example a 20, i don’t buy the argument that Indian indices are easy to beat because of the way they’re constructed because of the way the Dow has been constructed and American funds still find it hard to beat! Secondly the returns, if the Index Fund Manager buys or sells in advance, actively managed funds can no matter give you high returns but an retail investor can never time his exit to make use of the high returns. And the measure of the same is the Tracking Error. There is always fund manager risk in an active MF, but I think in few years it would be more streamlined and I hope government would not stop this retirement savings avenue.