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A recent report by Axis AMC shed light on the burgeoning Indian mutual fund industry. Since March 2021, the MF industry has grown at a CAGR (compounded annual growth rate) of 23.65%, touching an AUM (asset under management) of Rs 67.25 lakh crore in October 2024. <keyword id="20300870" type="General" weightage="20" keywordseo="Equity-Mutual-Funds" source="keywords">Equity mutual funds</keyword>, which garnered Rs 41,886.69 crore during the month, saw a 58.96% YoY growth. The biggest contributor to the equity segment was sectoral funds, which captured 29.3% of net equity sales in October 2024. In all, they brought in Rs 12,278.78 crore during October 2024. The AUM of <keyword id="20890471" type="General" weightage="20" keywordseo="Hybrid-Funds" source="keywords">hybrid funds</keyword> also stood at Rs 9.24 lakh crore during the month, registering an annual growth of 47.8% and inflows worth Rs 16,863.30 crore during October 2024. Amidst this, the arbitrage funds led in net sales, capturing 3.61% of their AUM with monthly inflows worth Rs 7,181.70 crores. There and more people are entering the Indian markets, as is evident in the growing SIP corpus (Systematic Investment Plans), which saw contributions worth Rs 25,323 crore in October 2024, a 54.7% year-over-year growth. In October 2024, about 63,69,919 new SIPs were registered, taking the number of SIP accounts to a record high of 10,12,34,212 The growth in equity investments was largely led by retail investors and HNIs (high-net-worth individuals). Since March 2021, the retail segment in mutual funds has seen a 31.2% CAGR, while banks and foreign investors have recorded a CAGR of 31.8% during the same period. Corporations were the biggest contributors to debt mutual funds. Notably, the AUM of debt funds grew 14.8% over the previous year to stand at Rs 10,65,037 crore as of October 2024. The category saw net sales worth Rs 47,699 crore last month. Also testimony to the growing interest of investors in mutual funds were the figures of <keyword id="23958398" type="General" weightage="20" keywordseo="Passive-Mutual-Funds" source="keywords">passive mutual funds</keyword>, which recorded net sales worth Rs 8,025 crore during the month. Out of this, just index funds observed net sales of Rs 7,931 crore in the previous month. AUM from the top 30 Indian cities grew at 22.6% CAGR, whereas other cities grew at 27.8% CAGR since March 2021. FY25 also seemed to be the year where NFOs received an enthusiastic response from investors. So far, a total of 124 NFO schemes have managed to collect a total of over Rs 77,932 crore.

Mutual funds in spotlight: Industry grew at 23.65% CAGR since March 2021

India's investment ecosystem is undergoing a seismic shift, with index investing gaining unprecedented traction among investors, according to a report by Motilal Oswal. The younger generation, including Gen Z and Millennials, shows a stronger inclination towards index funds as compared to older investors. They also prefer index funds over ETFs for better returns and liquidity. A recent report by Axis AMC also highlighted the growing appetite for ETFs, which witnessed net sales of Rs 15,403 crore in October 2024. While 46% of younger investors favor index funds, only 35% of Gen X and Boomers do so. Millennials and Gen X investors also have a keen interest in factor or smart beta funds, reflecting their appetite for innovative, albeit aggressive investment strategies. Passive funds have become a core component of investor portfolios, with 80% of investors increasing their allocation to these funds in 2024, compared to 53% last year. The Axis report echoed similar sentiments, noting that net sales in the passive category inched up to Rs 8,025 crore in October 2024. The combined assets under management (AUM) of passive funds have surged from Rs 7 lakh crore in September 2023 to over Rs 11 lakh crore by September 2024—a 1.5x growth in just one year. The survey also noted a growing popularity of ETFs, with 57% of respondents investing in them, up from 41% in 2023. Of these, 26% invest solely in ETFs, while 31% have diversified between ETFs and index funds. This rising preference is matched by a commitment to long-term investment. A significant 81% of investors plan to hold their passive investments for over three years, highlighting sustained confidence in the growth potential of these funds. Sectoral indices like Nifty IT and Nifty Bank dominate as the top choice for passive fund investors, selected by 67% of respondents. Benchmark indices such as the Nifty 50 and Nifty 500 follow closely, preferred by 61% of investors. A recent, similar report by stock broker Angel One also throws a spotlight on how young India plans and prefers mutual funds when it comes to savings and investments. The report, titled "Young Indians' Saving Habits Outlook 2024," compiled by Fin One, stated that 45% of respondents aged 22-35 have made it a point to save up some of their savings in mutual funds. A year ago, this figure stood at just 32%. Most of these investors make their way into mutual funds via SIPs, or systematic investment plans. 52% of respondents in the age cohort of 22-35 are now using SIPs to invest in mutual funds, up from 44% in the previous year. As for what was the driving factor behind beginning their investment journey, 42% underlined the past performance of funds, while 38% noted that advice from financial advisors remained a key consideration. 38% of young Indians are now increasingly focusing on building an emergency corpus, compared to 28% the year before. This shift underscores the drastic change in financial sensibilities brought forth by the pandemic and the consequent desire for greater financial resilience. In fact, approximately 4 out of every 5 surveyed investors maintained a dedicated, separate savings account. Out of the 1,650 individuals studied under the FinOne survey, a staggering majority made their first foray into the stock market in their early twenties. Nearly 2 in every 5 investors pick stock as their preferred choice of investment, followed by mutual funds and then savings bank accounts. While 45% of those surveyed picked stocks as their chosen investment avenue, 20% preferred mutual funds, and 15% wanted to keep their money in a savings bank account.

Gen Z and Millennials prefer stocks and mutual funds; index funds trump over ETFs, say recent reports

<keyword id="20207838" type="General" weightage="20" keywordseo="dsp-mutual-fund" source="keywords">DSP Mutual Fund</keyword>'s September 2024 Netra report credits <keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword>'s strong economic recovery to increased fiscal expenditure. The report, which tracks current economic trends and market insights through various charts, emphasizes the need for the private corporate sector and households to play a larger role in sustaining the ongoing growth momentum. Netra also pointed out an unsettling calm in the markets, with the Nifty 50 TRI index maintaining an impressive 53-month streak without a 5% decline and 13 years without a drop greater than 10%. Sahil Kapoor, Head of Products and Market Strategist, DSP Mutual Fund, said, "The calm in the markets, marked by an unnerving lack of volatility, is a double-edged sword. While it provides a sense of stability, it also masks underlying risks that could surface unexpectedly, catching investors off guard. To ensure a sustainable recovery, there is a need for the private sector and households to take the lead, transforming fiscal stimulus into lasting economic growth." However, the report notes a shift in market dynamics, with the momentum factor, which has outperformed since the COVID-19 bottom, beginning to lose its dominance. At the same time, the quality factor, which had underperformed over the last four years, is now seeing a resurgence, potentially indicating a change in market leadership that could favour quality-orientated funds, both active and passive. The report highlights the critical role government spending has played in the recovery, with a focus on capital investments crucial for future growth. However, contributions from the private corporate sector and households have lagged. It also draws attention to a slowdown in India's per capita consumption, approaching lows seen in previous cycles. Given that consumption accounts for around 60% of GDP, it is vital that this sector grows at a rate exceeding GDP growth to stimulate private capital expenditure. India's <keyword id="487578" type="General" weightage="20" keywordseo="tax-collections" source="Orion">tax collections</keyword> have demonstrated robust growth, with gross tax revenue showing a five-year compound annual growth rate (CAGR) of 14 %. This growth, largely driven by <keyword id="6354751" type="General" weightage="20" keywordseo="income-tax" source="Orion">income tax</keyword>, indicates a rising dependency on capital gains and stock market performance, introducing new vulnerabilities to the economy. The banking and financial services sector (<keyword id="19910880" type="General" weightage="20" keywordseo="bfsi" source="keywords">BFSI</keyword>) has emerged as a key driver of market earnings, recording a 12 % increase in profit after tax (PAT) growth, significantly outpacing the 4.6 % growth observed in non-BFSI Nifty 50 companies. This disparity underscores the sector's importance in India's economic story and highlights promising investment opportunities.

India's strong economic recovery is led by fiscal expenditure: DSP MF

Markets regulator <keyword id="19901201" type="General" weightage="100" keywordseo="Sebi" source="keywords" meta.keywordsubtype="org" meta.entityname="Sebi" meta.hostid="153" meta.entityid="Sebi">SEBI</keyword> has asked the <keyword id="20677983" type="General" weightage="20" keywordseo="mutual-fund-industry" source="keywords">mutual fund industry</keyword> to proactively conduct stress tests, a key component of <keyword id="20383727" type="General" weightage="20" keywordseo="risk-management" source="keywords">risk management</keyword> for the financial sector, which will help strengthen the ecosystem, its whole-time member Ananth Narayan Gopalakrishnan said on Friday. The regulator's stress testing emphasizes the need to assess and manage liquidity risks, especially in small and midcap equity schemes. Speaking at a mutual fund event, Gopalakrishnan highlighted the importance of modelling stress scenarios not just for individual schemes or fund houses, but for the entire mutual fund ecosystem. "It is also important to model stress scenarios for the entire composite mutual fund ecosystem. I would strongly encourage the industry and <keyword id="20090036" type="General" weightage="20" keywordseo="AMFI" source="keywords" meta.keywordsubtype="org" meta.entityname="AMFI" meta.hostid="153" meta.entityid="AMFI">AMFI</keyword> to take the lead and proactively conduct objective and credible industry wide stress tests. themselves," Gopalakrishnan said. He also emphasized the need to find better ways to communicate the risks associated with different mutual fund schemes. The SEBI official mentioned that while the current risk measurement system is straightforward and has had a significant impact, it doesn't fully capture the differences in risks among various investment schemes. According to him, many schemes are just labelled as high risk, even though they have different kinds of risks. The goal is to improve this system to better reflect those differences, while keeping it simple and easy to understand. One possible approach is to consider the portfolio's volatility and liquidity from stress tests to give a clearer picture. "While ensuring simplicity and ease of understanding remains a key objective, perhaps the underlying volatility of the portfolio along with the liquidity of the portfolio from stress tests could be used to provide better colour all around," he added. This comes at a time when the holdings of mutual funds by <keyword id="20234284" type="General" weightage="20" keywordseo="domestic-institutional-investors" source="keywords">Domestic Institutional Investors</keyword> (DIIs) and individuals have risen from about 54.3% of free float of all mid cap and small cap companies, as of March 2020 to 60.6% as of March 2024. Several fund houses have proactively stopped lump sum investments in some small-cap schemes and also capped the amount that can be invested through <keyword id="20675888" type="General" weightage="20" keywordseo="systematic-investment-plan" source="keywords">Systematic Investment Plan</keyword> (SIP) into small-cap schemes. He also highlighted the potential mismatch between the demand for paper and the supply of fresh paper coming into the ecosystem. Gopalakrishnan said the industry can make more progress in streamlining operations and improving efficiency for investors. "At a time when instantaneous fund transfers have become ubiquitous in our country, perhaps we should look to improve our internal processes and the security settlement ecosystem, to ensure that funds are passed on to investors on the day of the settlement itself, rather than a day after or two days after," he added. Over the last few years, the mutual fund industry has made impressive strides, and is now playing a crucial role in channeling financial savings towards risk capital formation. This was driven by stable macros, increased formalization, robust corporate earnings, digitisation and user friendly access. Moreover, the number of mutual fund investors has grown significantly from about 2 crore as of March 2019 to nearly 4.7 crore as of June 2024, an impressive compounded annual growth rate of 18% during that period. Gopalakrishnan mentioned that several exciting initiatives are in the works, developed with input from all stakeholders. These include a proposed low-ticket SIP, further breaking down regular SIPs into smaller, more accessible units (sachetisation and tokenization), and the introduction of "mutual funds lite" regulations. These new regulations will simplify rules for passively managed funds, reducing the compliance burden and encouraging competition and innovation. Additionally, a new class of higher-risk schemes is proposed for investors with a greater capacity to handle risk.

SEBI asks mutual fund industry to proactively conduct stress test

Equity <keyword id="19929240" type="General" weightage="20" keywordseo="mutual-funds" source="keywords">mutual funds</keyword> saw inflows worth Rs 40,537 crore during the month. On the other hand, <keyword id="20671790" type="General" weightage="20" keywordseo="debt-funds" source="keywords">debt funds</keyword> saw outflows to the tune of Rs 1,07,357.62 crores. Out of this, liquid funds saw the maximum outflows of Rs 80,354.03 crores. This is generally attributable to investors withdrawing money to meet their advance tax obligations. Overnight funds also saw outflows to the tune of Rs 25,142.72 crores. <keyword id="20296225" type="General" weightage="20" keywordseo="thematic-funds" source="keywords">Thematic funds</keyword> saw massive inflows of Rs 22,351.69 crore, the highest in <keyword id="20210668" type="General" weightage="20" keywordseo="equity-funds" source="keywords">equity funds</keyword>, and were the investor's favorite during June 2024, as per <keyword id="22344564" type="General" weightage="20" keywordseo="AMFI-data" source="keywords">AMFI data</keyword>. About 50% of the inflows in this category came from 9 new NFOs (new fund offers) in this category, which amassed Rs 12,974 crore. In terms of inflows, multi-cap funds came a distant second, garnering Rs 4,708.57 crore last month. Amidst <keyword id="22344565" type="General" weightage="20" keywordseo="hybrid-schemes" source="keywords">hybrid schemes</keyword>, multi-asset allocation funds, which garnered Rs 3,453.12 crore in June, and Arbitrage funds, which saw inflows worth Rs 3,836.58 crore remained investor favorites. The only hybrid scheme to see net outflows were conservative hybrid funds, which shed Rs 130.57 crore. <h2>Large-cap funds see moderate inflows</h2>Inflows in small cap funds tapered at Rs 2,263.47 crore, slightly below inflows seen by midcap funds, which stood at Rs 2,527.84 crore. However, inflows in large-cap funds sobered significantly to stand at Rs 970.49 crore. Investors clearly took a far greater liking to large and mid-cap funds, which saw inflows worth Rs 2,912.19 crore, which is reflective of investor's growing confidence in the Indian stock market, and their increasing desire to diversify their investments and take risks. As of June 30, 2024, the AUM (<keyword id="20257654" type="General" weightage="20" keywordseo="asset-under-management" source="keywords">asset under management</keyword>) of the Indian mutual fund industry stood at Rs 61.15 lakh crore. It took the MF industry 6 months to cross the Rs 60 lakh crore threshold, from the Rs 50-lakh crore mark. During the month, the number of new MF folios also stood at an all-time high of 19.04 crore. <h2>SIP Inflows at all-time high, <keyword id="20050894" type="General" weightage="20" keywordseo="gold-etfs" source="keywords">Gold ETFs</keyword> glitter hard</h2>SIP inflows for June surpassed the Rs 21,000-crore mark, standing at Rs 21,262 crore, as against Rs 20,904.37 crore in May 2024. Passive mutual funds (ETFs, Index funds) also registered a solid growth, with index funds gathering Rs 5,071.82 crores and other ETFs pulling in Rs 9,134.06 crores. Gold ETFs registered the highest month-on-month growth, gathering Rs 726.16 crore in June. Out of the 17 NFOs which were up for subscription last month, 9 belonged to the thematic fund category, while 2 were index funds. Cumulatively, these NFOs amassed Rs 15,227 crores.

AMFI Data: Debt funds see major outflows, thematic cap funds attract Rs 22,351.69 crores in June 2024

Our experts answer readers' investing questions and write unbiased product reviews (<a href="https://www.businessinsider.com/personal-finance/investing-rating-methodology" class="not-content-link" target="_blank">here's how we assess investing products</a>). Paid non-client promotion: In some cases, we receive a commission from <a href="https://www.businessinsider.com/personal-finance/our-partners" class="not-content-link" target="_blank">our partners</a>. Our opinions are always our own.<ul class="summary-list"><li>A mutual fund is a portfolio of investments that pools money from investors to purchase securities. </li><li>The majority of mutual funds are professionally managed with the aim to outperform the market.</li></ul>A mutual fund is a type of investment vehicle that pools money from many investors to purchase stocks, <a href="https://www.businessinsider.com/personal-finance/what-is-a-bond">bonds</a>, or other securities. Investors who mutually contribute to the fund company become part owners of the fund's portfolio and the income it generates or loses. You can invest in mutual funds through a broker or investment platform. The <a href="https://www.businessinsider.com/personal-finance/best-online-brokerage">best online brokerages</a> offer low minimums, account flexibility, investment tools and resources, and access to human advisors for personalized guidance and advice. Here's what to know about mutual funds, including how they work, what to watch out for, and how to get started investing in them. <h2>How do mutual funds work?</h2>Generally, mutual funds are actively managed by a fund manager who controls when to buy and sell securities to maximize returns and minimize losses. When you buy a mutual fund, you're buying partial ownership of the fund and its assets, meaning its entire portfolio of investments.This differs from buying an individual <a href="https://www.businessinsider.com/personal-finance/what-is-stock">stock</a>, where you buy partial ownership directly in a company and manage any subsequent moves yourself (unless you have a financial manager). The price of a mutual fund is determined by its net asset value (NAV), which takes all of the portfolio's securities into account. It is found by dividing the total value of the fund's assets (cash and securities) by the number of the fund's outstanding shares. Since a mutual fund's portfolio consists of many securities that change price throughout the day, the NAV is calculated at the end of the market day. Because of this, mutual funds trade only once per day, after the <a href="https://www.businessinsider.com/personal-finance/what-is-the-stock-market">stock market</a> closes.Example: Let's say you want to put $2,000 toward a mutual fund. If the fund's NAV is $20, you're able to purchase 100 shares — not counting fees. Along with other investors' contributions, that $2,000 would then be used by the fund manager to make trades with the goal of outperforming the market.<h2>Mutual fund fees</h2>You should be aware that mutual funds come with structured fees for active management, which eat into your total profits. A mutual fund will label fees into two main categories:<ul><li>Annual fund operating expenses: A fund's total annual operating expenses include management and transaction fees, which are expressed collectively as the fund's <a href="https://www.businessinsider.com/personal-finance/what-is-expense-ratio">expense ratio</a>. While relatively small, expense ratios can significantly affect a fund's return, especially over time.</li></ul><ul><li>Shareholder fees: A fund can also come with shareholder fees, which cover commissions regarding buying and selling the fund. Most mutual funds will have a sales charge called a "load," which can be a flat fee or a commission, and occur when you purchase or sell your shares back to the fund. </li></ul>If you're in the market for a mutual fund, its fees are an important factor to consider. You can find all associated fees outlined in detail in the fund's <a href="https://www.businessinsider.com/personal-finance/prospectus">prospectus</a>.<h2>How to make money investing in mutual funds</h2>You can make money on mutual funds in a few different ways:<ul><li><a href="https://www.businessinsider.com/personal-finance/what-is-a-dividend">Dividend payments </a>: Similar to stocks, a mutual fund can pay out dividends to its investors periodically. They can choose to receive these payouts as cash or to reinvest them in your account.</li><li><a href="https://www.businessinsider.com/personal-finance/what-are-capital-gains">Capital gains</a> : When an investor sells a fund at a profit, that's known as a capital gain. This gain gets passed off to a fund's shareholders annually.</li><li>NAV: If your mutual fund's value increases, the price to purchase its shares will also increase. This benefits you if you choose to sell your shares since you would sell at a gain. </li></ul>Quick tip: When looking at NAV, you want to follow how a fund's value changes over time, rather than comparing one fund's value to another in a single day.<h2>Are mutual funds a good investment?</h2>Compared to buying individual stocks or bonds, investing in mutual funds is a more effective way to diversify your investment portfolio."Mutual funds are an easy and well-established way to give everyday investors diversification," says Michael Iachini, CFP and head of manager research for <a href="https://www.schwab.com/investment-advice" target="_blank" rel="noopener">Charles Schwab Investment Advisory</a>. "They are well established since the 1920s, and they have a track record of working for investors."If you're looking to invest in mutual funds, just make sure to keep an eye on costs, since actively managed mutual funds can eat into your profits with expense ratios and commissions. Beginner investors may be better off choosing <a href="https://www.businessinsider.com/personal-finance/what-is-an-index-fund">index funds</a> over actively managed funds to snag earnings without a big price tag. <h2>Pros and cons of mutual funds</h2>Before you add mutual funds to your portfolio, there are advantages and disadvantages that can help you decide whether they are the right fit for your investment style and goals.<table style="border-collapse: collapse; width: 100%; height: 287px;" border="1"><tbody><tr style="height: 22px;"><td style="width: 37.2078%; height: 22px;">Pros</td><td style="width: 37.7922%;">Cons</td></tr><tr style="height: 265px;"><td style="font-weight: normal; width: 37.2078%;"><ul><li>Offer simplicity and peace of mind with professional fund managers.</li><li>Typically require a small minimum investment to buy in.</li><li>Add diversification to your portfolio with various asset classes and industries</li><li>Ability to invest with exact dollar amounts versus buying shares of stocks at fluctuating prices.</li></ul></td><td style="width: 37.7922%; height: 265px;"><ul><li>Professional management fees can be costly. </li><li>Not insured by the Federal Deposit Insurance Corporation (<a href="https://www.businessinsider.com/personal-finance/fdic">FDIC</a>), so there is the risk of losing money.</li><li>A chance of dilution decreasing the worth of your shares when a successful mutual fund grows too big.</li><li>You have no control over a fund manager's decisions, which can trigger tax implications like capital gains that add to your taxable income.</li><li>Since mutual funds trade after markets close, they don't allow for trading during the day and taking immediate advantage of market movements.</li></ul></td></tr></tbody></table><h2>Types of mutual funds</h2>Mutual funds aren't homogenous. They are classified into many different types, including the securities they invest in and the investment goals they seek to achieve. Here are seven of the major types:<h3>1. Equity funds</h3>Equity funds invest mostly in stocks and are often categorized by company size and <a href="https://www.businessinsider.com/personal-finance/what-is-market-cap">market capitalization</a>. Equity funds can be labeled as growth, value, or blended funds. Growth funds hold shares of companies with potential to outperform the overall market, while value funds are filled with stocks of seemingly undervalued companies. Blended funds mix both growth and value stocks."Remember there are more than 10,000 equity mutual funds, yet there are only 2,800 stocks that trade on the New York Stock Exchange," says Clark Kendall, president and CEO of <a href="https://kendallcapital.com/" target="_blank" rel="noopener">Kendall Capital</a>. "Equity mutual funds do a great job of slicing and dicing the equity markets however you would like to have your market served to you."Quick tip: Over the long term, equity funds can generate a much higher yield than other mutual funds. Though stock investments can be volatile, equity funds offer more portfolio diversity than many of the other mutual fund types and individual stock investments.<h3>2. Bond funds</h3>Bond funds pool investors' money to primarily purchase bonds, from short- to long-term maturities. Some funds include a range of securities including government bonds, corporate bonds, and mortgage-backed securities, while others may focus on a specific part of the bond market.Bond funds provide quick diversification without buying various bonds individually. Many funds also distribute dividends each month, which you can reinvest. <ul><li>Corporate bonds: issued by corporations that mature over a period of time and pay interest if you hold the bond to maturity</li><li>Government bonds: issued by the US government, including <a href="https://www.businessinsider.com/personal-finance/treasury-bonds">Treasury securities</a>, with fully taxable interest from a federal level and tax-free from a state level</li></ul><ul><li>Municipal bonds: issued by local governments and other authorities to pay for projects such as projects such as toll roads, stadiums, and hospitals; interest is exempt from federal taxation and in many cases state and local taxation as well</li></ul>Quick tip: If you invest in municipal bonds, the interest you earn is exempt from federal taxation, and if you buy the bonds in the state where you live they are also exempt from state taxation.<h3>3. Money market funds</h3>Money market funds are fixed-income mutual funds that invest in short-term debt securities with low credit risk. These funds aim to provide <a href="https://www.businessinsider.com/personal-finance/what-is-liquidity">liquidity</a>, maintain a stable share price, and distribute regular income earned on its securities to its investors. Money market funds are categorized as government, prime, or tax-exempt, depending on the securities held within the fund. Securities often invested in money market funds include short-term US Treasury securities, federal agency notes, <a href="https://www.businessinsider.com/personal-finance/certificate-of-deposit">certificates of deposit</a>, corporate commercial paper, and municipal agency obligations. Quick tip: Money market funds are typically not a good place to keep your money for very long. Over time the low yield of the fund may not match the rate of inflation, management fees, or tax liabilities.<h3>4. Balanced funds</h3>Balanced mutual funds invest in both bonds and stocks, so you get the best of both worlds with steady income and investment growth. Also known as asset allocation funds, these funds typically stick to their original asset mix. If any changes are made, the funds are automatically rebalanced to bring them back to the original allocation.<h3>5. Index funds</h3>Index funds are a type of mutual fund designed to mirror the performance of a particular market index, like the S&amp;P 500 or the Dow Jones Industrial Average. Because index funds are built to match the performance of the target index, they are passively managed investments. This means they require less research and trading from the fund manager, so there are fewer fees and expenses. It's important to note that while an index fund can be structured as a mutual fund, it can also be an exchange-traded fund (<a href="https://www.businessinsider.com/personal-finance/what-is-an-etf">ETF</a>). Index funds are especially favored by investors because they are a low-risk, low-maintenance, low-cost way to see steady returns over time. <h3>6. Specialty funds</h3>Specialty funds, or sector funds, concentrate on securities within a specific industry or market sector, such as real estate, technology, or healthcare. Examples of specialty funds include real estate mutual funds, which invests in <a href="https://www.businessinsider.com/personal-finance/what-is-a-reit">REITs</a> and other real estate-related investments. Because specialty funds are focused on specific sectors like health care and technology, they aren't diverse so you'll want to mix these in with other types of funds and assets. A more recent trend in mutual funds has been "<a href="https://www.businessinsider.com/personal-finance/what-is-impact-investing">impact investing.</a>" They target companies or projects committed to specific social or environmental causes. These funds cater to investors who are increasingly looking to direct their money to companies that are making positive social or environmental impacts in the world. While many perform well, the return on impact investments may be lower than more traditional investments.<h3>7. Target-date funds</h3><a href="https://www.businessinsider.com/personal-finance/target-date-funds">Target-date funds</a> operate with a specific goal date in mind. These funds automatically rebalance the asset mix within their portfolio over time and become more risk-averse as the target date nears. Target-date funds are popular for retirement savings since you can set your retirement date as the target, and let the fund adjust for you.<h3>8. Hybrid funds</h3>Hybrid funds invest in two or more asset classes whereas other mutual funds tend to invest in a single asset class. Hybrid funds often combine stocks and bonds, but may even include <a href="https://www.businessinsider.com/personal-finance/what-are-commodities">commodities</a> like raw materials or precious metals.The goal of a hybrid fund is to reduce risk by further diversifying the investors' portfolio, even more so than other mutual fund types. Further, hybrid funds can offer an investor a combination of income generation, capital gains, and NAV. <h2>Mutual funds — Frequently asked questions (FAQs)</h2><h3 class="faq-question">What are the 4 types of mutual funds?</h3>There are multiple types of mutual funds, such as equity funds, bond funds, money market funds, balanced funds, index funds, specialty funds, and target-date funds. Different kinds of mutual funds invest in different securities for varying financial goals. <h3 class="faq-question">Do mutual funds pay interest?</h3>Yes, depending on the type of mutual fund you invest in, you may earn interest on certain assets in your portfolio. These funds often invest in fixed-income securities. Mutual funds that can earn interest are money market funds, bond funds, and balanced funds. <h3 class="faq-question">Are mutual funds a safe investment?</h3>Mutual funds are generally considered a safe investment. Compared to individual stocks, investing in mutual funds helps diversify your investment portfolio and lower your overall market volatility. But keep in mind that mutual funds are not risk-free. Just like an investment, there is a level of risk involved and no guarantee that you're investment will turn a profit. <h2>How to start investing in mutual funds</h2>You likely have already invested in mutual funds if you have a <a href="https://www.businessinsider.com/what-is-a-401k">401(k)</a> retirement account. But if you want to start investing in mutual funds outside of employer-sponsored accounts, you can buy and sell them through an online broker with a brokerage account. You can also buy mutual funds directly from the company that created the fund, like Vanguard - Product Name Only or Fidelity Investments - Product Name Only, although that limits your options to whatever they offer. If you need more guidance with your investments, you could consider working with a financial advisor or broker.Each fund and each brokerage account may require a specific minimum investment amount to get started. "You typically don't need a lot of money in a mutual fund," says Iachini. "At least have $100 saved up. Once you've chosen a fund, look at its asset class, expense ratio, investment objective, whether that's income, growth, or intentionally trying to be conservative, and who is managing the fund." It helps to ask yourself a few questions to help narrow down your options. How involved in rebalancing your asset allocation do you want to be? What are you saving for? What do you value? For example, if you're saving for retirement, you'll want to look to target-date funds. Or perhaps you want to look for <a href="https://www.businessinsider.com/personal-finance/esg-investing">ESG</a> funds that invest in socially conscious companies.

Mutual funds: Definition, types, and how to invest

<ul><li>In the hotly-contested debate around active versus passively-managed schemes, often many investors miss the woods for the trees.</li><li>The beauty of passive investing is that it does not suffer from any emotional bias, recency bias or any other prejudice that afflicts humans.</li><li>Passive products such as index funds and ETFs are better-suited for tactical allocation in a portfolio. </li></ul> If mutual funds are a cricket team, actively-managed funds would be the star batsmen while passively-managed schemes would be the all-rounders. In the hotly-contested debate around actives versus passives, often, many investors miss the woods for the trees. In a seasoned portfolio, both active and passive products have their respective place because of the inherent design. Yet, the narrative often gets hijacked and becomes a question of either or, instead of deciding the choice of the right product for the right investor. Given the dynamic nature of markets and economic cycles, it is impossible to guess the winning asset class/theme/sector consistently. Furthermore, there may be prolonged cycles of outperformance and underperformance of these investments, and thus difficult to project the winner. So, investors should ideally have a mix of investment plays in their portfolios through active and passive products. While domestic markets have been stuck in a range for quite some time, tactical bets have played out in sectors such as banking, public sector undertaking (PSU), infrastructure and consumption sectors. This has brought to the fore the utility of passive product allocation when used tactically. Here, for tactical plays, one can do it largely through passive products such as thematic/sectoral index funds and ETFs or exchange-traded funds, and core plays through actively-managed diversified funds that can generate better investment outcomes over the long-term. The beauty of passive investing is that it does not suffer from any emotional bias, recency bias or any other prejudice that afflicts humans. Since portfolio construction and maintenance is rule-based, passive products give simple pure-play exposures to sectors/themes at the lowest cost possible. This fits well with the overall tactical allocation principle and dynamic nature of product requirement to exploit short-lived market opportunities. Tactical plays Tactical asset allocation is practised by many investors. This is done by smart shifts in a certain percentage of assets held in various categories to take advantage of strong market sectors/asset classes. Such a strategy allows investors to create extra value by taking advantage of certain situations in the market. Passive products such as index funds and ETFs are better-suited for tactical allocation in a portfolio on account of various reasons as listed below: One, passive products track markets efficiently. There is no time lost in tweaking a portfolio, since indices get rebalanced at defined intervals and positions can be taken quickly. Two, specific themes/sectors often offer a short window of opportunity for tactical allocations. Especially, when it comes to sectoral allocation, timing matters and for this type of allocation one can choose a passive offering. Healthcare as a theme saw a sharp rally during the pandemic years. The S&amp;P BSE Healthcare index delivered 61.45% and 20.87% respectively in calendar years 2020 and 2021. However, come 2022 and 2023 (year-to-date), the index delivered a negative return to the tune of 12.5% and 13% respectively. If an investor had initiated investments in 2020 and held on to it till date, almost half of the gains accumulated till 2021 would have been wiped out. This shows the importance of getting both the entry and the exit right in sectoral/thematic investments. Three, for commodities investing, a savvy investor can consider the ETF route as it efficiently tracks the price of the underlying commodity. So, if an investor is bullish on, say, the outlook of gold or silver, instead of physically buying or storing these commodities, he can just own these in ETF form and enter and exit the position with ease thereby boosting portfolio return. Four, passive smart-beta offerings can be harnessed to play a market trend. If the market is momentum based, one of the easiest ways to participate is through momentum-based smart beta offerings. In this manner, you can participate in the trend without disturbing the core of your long-term portfolio. Similarly, a knowledgeable investor can tactically make use of smart-beta offerings to play a particular style of investing. To conclude, over a complete market cycle, there will be times when active management triumphs and at other times, a passive approach may outperform. An ideal portfolio should be one which captures both these trends. Instead of pitting one strategy against the other, harness the power each of these approaches offer. At all times, use an informed eye to decide when and how much to skew towards passive. If unsure, seek help from a financial advisor. (The writer is the head of investment strategy at ICICI Prudential AMC)

How passive offerings can contribute to tactical allocation of a portfolio

<ul><li>There are two types of <keyword id="6357979" type="UNKNOWN" weightage="20" keywordseo="mutual-funds">mutual funds</keyword> one can invest in—active funds and <keyword id="1653368" type="PERSON" weightage="20" keywordseo="passive-funds">passive funds</keyword>.</li><li>Funds that involve the active role of fund managers to earn high returns are <keyword id="2944327" type="PERSON" weightage="20" keywordseo="active-funds">active funds</keyword> and funds who mirror returns of a particular index are passive funds.</li><li>It is better to have a combination of both funds in your portfolio as one will fetch you higher returns than market and the other may give you relatively lower but stable returns.</li></ul>Anyone who has started researching investment in mutual funds must have heard of two topics—active and passive funds and wondered what it means. Here is a simple answer to that. Funds that involve the active role of fund managers to earn high returns are active funds. Here are some examples of the best performing funds in this category in the last one year. <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Examples of top performing equity related active funds </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Return in last one year </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">ICICI Prudential Commodities Fund </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">160% </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Quant Small Cap </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">155% </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Kotak Small Cap </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">122% </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Nippon India Small Cap Fund </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">115% </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">L&amp;T Emerging Businesses </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">113% </td></tr></tbody></table>Source: Value Research The funds that mirror returns of a specific index like BSE Sensex, Nifty 50 or S&amp;P BSE 250 Small Cap index are passive funds. <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Examples of top performing equity related passive funds </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Return in last one year </td></tr><tr><td style="border-left:solid #cccccc 0.8333325pt;border-right:solid #cccccc 0.8333325pt;border-bottom:solid #cccccc 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Nippon India Index Fund - Sensex Plan </td><td style="border-left:solid #cccccc 0.8333325pt;border-right:solid #cccccc 0.8333325pt;border-bottom:solid #cccccc 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">39.90% </td></tr><tr><td style="border-left:solid #cccccc 0.8333325pt;border-right:solid #cccccc 0.8333325pt;border-bottom:solid #cccccc 0.8333325pt;border-top:solid #cccccc 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">LIC MF Index Fund Sensex </td><td style="border-left:solid #cccccc 0.8333325pt;border-right:solid #cccccc 0.8333325pt;border-bottom:solid #cccccc 0.8333325pt;border-top:solid #cccccc 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">39.10% </td></tr><tr><td style="border-left:solid #cccccc 0.8333325pt;border-right:solid #cccccc 0.8333325pt;border-bottom:solid #cccccc 0.8333325pt;border-top:solid #cccccc 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">ICICI Prudential Nifty Index Growth </td><td style="border-left:solid #cccccc 0.8333325pt;border-right:solid #cccccc 0.8333325pt;border-bottom:solid #cccccc 0.8333325pt;border-top:solid #cccccc 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">42.80% </td></tr><tr><td style="border-left:solid #cccccc 0.8333325pt;border-right:solid #cccccc 0.8333325pt;border-bottom:solid #cccccc 0.8333325pt;border-top:solid #cccccc 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">UTI Nifty Index Fund </td><td style="border-left:solid #cccccc 0.8333325pt;border-right:solid #cccccc 0.8333325pt;border-bottom:solid #cccccc 0.8333325pt;border-top:solid #cccccc 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">43.40% </td></tr><tr><td style="border-left:solid #cccccc 0.8333325pt;border-right:solid #cccccc 0.8333325pt;border-bottom:solid #cccccc 0.8333325pt;border-top:solid #cccccc 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Franklin India Index Fund Nifty Plan </td><td style="border-left:solid #cccccc 0.8333325pt;border-right:solid #cccccc 0.8333325pt;border-bottom:solid #cccccc 0.8333325pt;border-top:solid #cccccc 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">42.20% </td></tr></tbody></table>Source: Fincash <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Active funds </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Passive funds </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Intends to outperform returns of a specific index set as benchmark </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Intends to match or mirror returns of a specific index </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Fund managers play a huge role in decision making of selling and buying of stocks </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Do not involve any human intervention and sticks to the stock list similar to the index that is being followed </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Attract higher charges called expense ratio for fund manager skill </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Have lower expense ratio as no special skill is involved here </td></tr></tbody></table> Active funds are for investors who want to earn more returns than the market and are willing to take a certain amount of risk When I say XXX is an active fund it means the underlying assets i.e equity, debt etc of the mutual fund are being bought and sold by the fund manager. Here the fund manager has the right to pick and choose his/her <keyword id="6362476" type="UNKNOWN" weightage="20" keywordseo="investments">investments</keyword> with the aim to deliver higher returns than a chosen benchmark. The fund manager will actively buy, hold and sell stocks to try to achieve the return promised to investors. The idea behind actively managed funds is to allow ordinary investors to invest money under a professional stock picker who manages their money. When things go well, actively managed funds can deliver performance that beats the market over time. However, the returns are not guaranteed. Meanwhile, passive funds are suitable for investors who are looking for simple and low risk investment vehicles There is relatively lower risk in passive funds as here the underlying fund is just replicating the stocks of a particular index one has invested in. For example, there are passive funds that replicate the large cap, mid cap, and small cap indices. For some debt space, funds replicate performances of 10-year government securities and so on. One of the benefits of a passive fund is that it attracts a lower expense ratio as the fund manager does not use his skill or knowledge to pick stocks. He simply replicates the returns of an index. Generally, the difference between active and passive funds can be as high as 1-1.5% which eventually impacts the in hand profit of the investor. You would now ask active or passive? It is better to have a combination of both funds in your portfolio as one will fetch you higher returns than market and the other may give you relatively lower but stable returns. SEE ALSO: <a href="https://www.businessinsider.in/business/telecom/news/vodafone-idea-news-birla-offers-to-give-up-his-27-stake-in-vodafone-idea/articleshow/84969189.cms">Birla offers to give up his 27% stake in Vodafone Idea to keep phones of 27 crore Indians ringing </a> <a href="https://www.businessinsider.in/business/news/policybazaar-ipo-all-you-need-to-know-the-details-of-sixth-largest-fintech-startup/articleshow/84967042.cms">All you need to know about the IPO from Policybazaar, India's sixth largest fintech startup </a>

It’s not a choice between active funds or passive funds ⁠— you should have a right mix of both in your portfolio

ETFs performed better than actively-managed equity mutual funds in FY23

<ul><li>Indians buy <keyword id="18712" type="General" weightage="20" keywordseo="gold" source="Orion">gold</keyword> on <keyword id="126295" type="General" weightage="20" keywordseo="akshaya-tritiya" source="Orion">Akshaya Tritiya</keyword> as it is believed that the day symbolises good luck, success and fortune.</li><li>This year Akshaya Tritiya falls on April 22 and companies are offering multiple ways consumers can buy gold.</li><li>Gold has risen 15% since the last Akshaya Tritiya on May 3, 2022.</li><li><keyword id="46002" type="General" weightage="20" keywordseo="gold-prices" source="Orion">Gold prices</keyword> scaled a record high of ₹61,660 per 10 gm on April 19, 2023 in Mumbai.</li></ul>Akshaya Tritiya also known as Akha Teej is a Hindu festival considered to be a highly auspicious and sacred day – and a good day to buy gold and properties. As per mythology, a number of events took place on Akshaya Tritiya, making it an auspicious day. For instance Maharishi Ved Vyasa, the author of Mahabharata, is believed to have started narrating the epic to Lord Ganesh on this day. This year Akshaya Tritiya falls on April 22, Saturday. And gold has risen 15% since the last Akshaya Tritiya on May 3, 2022, according to Quantum AMC. Gold prices hit a record high at ₹61,660 per 10 gm on April 19, 2023 in Mumbai. “This Akshaya Tritiya seems like an opportune time to load up your purchase as the macroeconomic backdrop and risk-reward dynamics seem to favour gold and the downside looks limited,” said Ghazal Jain, fund manager- alternate investments, Quantum AMC. The yellow metal is considered as a hedge against inflation and a safe haven compared to assets like equities, bonds and currencies. A mild recession and weaker earnings have historically been gold-positive. A further weakening of the dollar as inflation recedes could provide support for gold. The current uncertain macro environment triggered by the war between Russia and Ukraine, high inflation across the globe, rising interest rates and now the banking crisis in the US and Europe – all make a case for buying gold. “Domestic gold prices are derived from international gold prices. International gold prices are priced in US dollars and hence the dynamics of the US economy are big drivers of gold prices. Expectations of a monetary policy pivot by the Federal Reserve are gathering steam after a regional banking crisis in the United States made the economic impact of higher interest rates apparent,” said Jain. “Further deterioration in economic conditions could drive risk aversion, hurt risk assets and lead gold prices up,” she said. Soaring gold prices have led Titan’s jewellery arm Tanishq to reinstate its advanced booking option, allowing buyers to lock in the price of the yellow metal ahead of Akshaya Tritiya. It has also amplified its gold-exchange programme and introduced an affordable range of jewellery to woo consumers. From gold jewellery and coins to gold ETFs or exchange-traded funds, there are multiple ways in which one can invest in gold. Here are some ways to invest in gold: <keyword id="36023" type="General" weightage="20" keywordseo="Gold-coins" source="Orion">Gold coins</keyword> You can buy gold coins from MMTC-PAMP – a joint venture between Switzerland-based bullion brand PAMP SA and MMTC, a Government of India Undertaking. You can also buy them from non-government sources such as jewellers and bullion traders. <keyword id="2754241" type="General" weightage="20" keywordseo="Sovereign-gold-bonds" source="Orion">Sovereign gold bonds</keyword> Sovereign gold bonds (SGB), a substitute to physical gold, is a paper issued by the government that is denominated in terms of grams of gold. Basically, SGBs give investors an exposure to gold, but not in a physical form like gold bars or jewellery. The Indian government had initiated the investment options in 2015 as an alternative to owning physical gold. These bonds have a term of eight years with a lock-in period of five years. However, that does not necessarily mean that the investment needs to be compulsorily held till maturity. Investors can opt for premature redemptions. Additionally, gold bond investors have the option of selling the bonds anytime on the stock exchanges. Gold exchange-traded funds (ETFs) Gold ETFs are passive investment instruments that invest in gold bullion, and aim to track the domestic physical gold price. In other words, Gold ETFs are units representing physical gold which may be in paper or dematerialised form. ETFs reflect the current gold prices unlike physical gold prices, which vary across India depending on local taxes in each state, transportation cost and other related costs. Since ETFs are listed on an exchange, they offer high liquidity. You can buy or sell your holdings at any time during the day at the real-time price of gold. <keyword id="1024100" type="General" weightage="20" keywordseo="Gold-mutual-funds" source="Orion">Gold mutual funds</keyword> Gold mutual funds are a type of mutual fund that invest their corpus in various gold forms including physical gold and gold mining companies. The performance of gold funds is dependent on the movement of stock prices of these companies. Since gold mutual funds are actively managed by a fund manager, it has the potential to offer higher returns as compared to gold ETFs that mimic a market index. <keyword id="4465249" type="General" weightage="20" keywordseo="Digital-gold" source="Orion">Digital gold</keyword> It allows you to purchase the precious metal online, but eliminates the need to physically store it. Digital gold can be bought online through fintech platforms like Groww, Kuvera etc., and through brokers as well. The gold purchased as digital commodity will be stored in insured vaults by the seller on behalf of the customer. All you need is internet/mobile banking and you can invest in gold digitally anytime, anywhere. Moreover, you can invest an amount as low as ₹10. Here is how to invest in digital gold via fintech platforms: <ul><li>Signup on the fintech platform to start the investment</li><li>Enter an amount in rupees or grams</li><li>Complete the know-your-customer (KYC) process</li><li>Pay for the investment</li><li>Store your gold in a secured locker</li><li>Later, when you sell you can choose to sell your gold digitally on the platform or take physical delivery of the gold. You can request for a doorstep delivery of your gold in the form of coins or bullion. </li></ul> SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/rils-q4-to-be-driven-by-sustained-momentum-in-retail-business-o2c-to-see-modest-growth/articleshow/99629278.cms">RIL’s Q4 to be driven by sustained momentum in retail business, O2C to see modest growth</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/condom-maker-mankind-pharmas-4326-crore-ipo-to-open-next-week-on-april-25/articleshow/99614288.cms">Condom maker Mankind Pharma’s ₹4,326 crore IPO to open next week on April 25</a>

Here are the many ways you can invest in gold this Akshaya Tritiya

<ul class="summary-list"><li>Passively managed <keyword id="11900043" type="UNKNOWN" weightage="60" keywordseo="index-funds" source="Orion">index funds</keyword> have hit a milestone by overtaking actively managed funds in US stock ownership.</li><li><keyword id="12783290" type="UNKNOWN" weightage="60" keywordseo="passive-funds" source="Orion">Passive funds</keyword> held 16% of <keyword id="12002458" type="UNKNOWN" weightage="60" keywordseo="us-stock-market" source="Orion">US stock market</keyword> cap, compared with 14% for <keyword id="14130466" type="UNKNOWN" weightage="60" keywordseo="active-funds" source="Orion">active funds</keyword>, at the end of 2021.</li></ul>Passively managed index funds now own a bigger share of the US stock <keyword id="11893875" type="UNKNOWN" weightage="100" keywordseo="markets" source="Orion">markets</keyword> than actively managed funds for the first time, according to new <a href="https://www.icifactbook.org/pdf/2022_factbook.pdf">data</a> from the <keyword id="14130467" type="UNKNOWN" weightage="60" keywordseo="investment-company-institute" source="Orion">Investment Company Institute</keyword>.At the end of 2021, <a href="https://www.businessinsider.com/personal-finance/passive-investing">passive index funds</a> that focus on shares in US corporations accounted for 16% of <keyword id="11895527" type="UNKNOWN" weightage="60" keywordseo="us-stocks" source="Orion">US stocks</keyword> by market capitalization, ICI's research found. At the same time, actively managed funds held 14% by market value, meaning the typically lower-cost passive products have overtaken that segment for the first time.Both types of funds still lag the big investors — such as hedge funds, pension funds, life insurance companies, and individuals — which held 70% of US equities by value.The unflagging rise of passive index funds — which track a particular index by holding all the assets in it or a sample of them — has seen them amass trillions of dollars in assets ever since Vanguard's Jack Bogle began offering the buy-and-hold investment strategy in the 1970s.Those gains have been at the expense of actively managed mutual funds. In the last decade, more than $2 trillion has flowed from active to passive funds, mainly to index <a href="https://www.businessinsider.com/personal-finance/what-is-an-etf?r=US&amp;IR=T">exchange-traded funds</a> (ETFs), according to ICI. The situation was reversed 10 years ago, when 20% of <keyword id="11893878" type="UNKNOWN" weightage="60" keywordseo="stocks" source="Orion">stocks</keyword> were held by active funds and 8% by passive ones.But Cathie Wood — who runs active investment management firm Ark Invest — and Tesla CEO Elon Musk are among those who <a href="https://markets.businessinsider.com/news/stocks/elon-musk-cathie-wood-hit-passive-investing-missing-big-gains-2022-5">agree the rise of passive investment has gone too far</a>. Wood has described the shift to passive investment as a "massive misallocation of capital."Wood argued that investors in passive funds are primed to miss out on massive returns on particular stocks, such as a 400-fold gain in Tesla shares logged before the stock was added to the S&amp;P 500.Despite this, demand for index funds in all assets is rising, and this has helped put a bigger share of these assets in the hands of the five largest US fund companies, ICI found. These accounted for 54% of the industry's total assets last year, while the 10 largest oversaw 83% of all assets."The increased concentration reflects the growing popularity of index funds — the 10 largest fund complexes manage most of the assets in index mutual funds," ICI said in its 2022 fact book.

Passive index funds now own a bigger chunk of US stocks than active funds for the 1st time

<ul class="summary-list"><li><keyword id="440024" type="PERSON" weightage="60" keywordseo="index-funds" source="Orion">Index funds</keyword> are financial vehicles that pool investors' money into a portfolio of securities that mirror a particular market index.</li><li>Because they are passively managed, index funds have low fees.</li><li>Diversified by design, index funds are relatively low-risk, but their gains tend to be slow as well. </li></ul>An index fund is a type of financial vehicle that pools investors' money to purchase a portfolio of stocks, bonds, or other securities. This portfolio is designed to mimic a particular financial market index - a select group of securities. An index fund can be structured as either a <a href="https://www.businessinsider.com/how-to-invest-in-mutual-funds-step-by-step-guide" target="_blank" rel="noopener">mutual fund</a> or as an <a href="https://www.businessinsider.com/personal-finance/what-is-an-etf-exchange-traded-fund" target="_blank" rel="noopener">exchange-traded fund</a> (ETF). The term "index fund" applies to either, but it's often used synonymously with an ETF, since so many <keyword id="46594" type="PERSON" weightage="60" keywordseo="ETFs" source="Orion">ETFs</keyword> are index-tracking instruments.Index funds differ from other funds on the basis of their investment strategy. This strategy is to follow its benchmark, or designated market index - generally, a broad-based one that tends to perform well over time.There are many different indexes tracking different sectors of the market. Along with the well-known S&amp;P 500, others include:<ul><li>Dow Jones Industrial Average (<a href="https://markets.businessinsider.com/index/dow_jones" target="_blank" rel="noopener">DJIA</a>), which is made up of 30 large-cap companies</li><li>Russell 2000 (<a href="https://markets.businessinsider.com/index/russell_2000" target="_blank" rel="noopener">RUT</a>), which consists of 2,000 small-cap stocks</li><li>Bloomberg Barclays US Aggregate Bond Index, (<a href="https://www.bloomberg.com/quote/LBUSTRUU:IND#:~:text=LBUSTRUU%20Quote%20%2D%20Bloomberg%20Barclays%20US,Unhedged%20USD%20Index%20%2D%20Bloomberg%20Markets">LBUSTRUU</a>), which consists of bonds</li><li>MSCI EAFE (<a href="https://markets.businessinsider.com/etfs/ishares-msci-eafe-etf-us4642874659" target="_blank" rel="noopener">MXEA</a>), which is made up of foreign stocks</li><li>New York Stock Exchange Composite Index (<a href="https://markets.businessinsider.com/index/nyse-composite" target="_blank" rel="noopener">NYA</a>), which includes all common stocks listed on the NYSE</li></ul><h2>How index funds work</h2>When you invest in an index fund, you're buying shares in all the companies that make up the index. Most index funds are weighted by market capitalization - the total dollar market value of a company's shares. That means that these funds usually purchase more of the largest companies in the index than of the smallest companies. The composition of the benchmark index determines the trading decisions of an index fund. By design, true index funds must follow their index. That means there is no room for fund managers to make decisions about which trades to make. Rather than actively picking stocks, they are practicing <keyword id="7082929" type="UNKNOWN" weightage="60" keywordseo="Passive-management" source="Orion">passive management</keyword>. Index funds are also referred to as "passive funds" or "passively managed funds."Some funds, called "active index funds," largely follow an index but also allow the fund manager to choose to buy certain other individual stocks or sell others. These are not true index funds because they do not necessarily follow an index. Over time, the portfolio of these funds may differ significantly from the index the fund purportedly follows.<h2>Benefits of index funds</h2>Many investors, especially beginners, prefer index funds to invdividual stocks for plenty of reasons. The main benefits of index funds include:<h3>1. Diversification means you'll usually win. </h3>Up to 90% of active fund managers underperform <a href="https://www.spglobal.com/spdji/en/documents/spiva/spiva-us-year-end-2016.pdf" target="_blank" rel="noopener">compared to their benchmark index</a> (that is, the segment of the market they loosely follow).And if a problem for the pros, imagine what it's like for the amateur investor. "Trying to pick winners, for most, is a loser's game," says <a href="https://business.creighton.edu/faculty-directory-profile/2010/robert-johnson" target="_blank" rel="noopener">Robert R. Johnson</a>, Professor of Finance at Creighton University. "The solution is to invest in diversified funds."An index fund provides you with a diversified portfolio of stocks that, as a group, usually do well over time. For example, the <a href="https://markets.businessinsider.com/funds/vanguard-500-index-fund-investor-shares-us9229081081" target="_blank" rel="noopener">Vanguard 500 Index Fund</a> (the one that started it all) has seen a 5-year average return of 11%.<h3>2. They are cost-effective </h3>Diversification can be expensive to pursue by yourself with individual investments. Index funds offer more bang for the buck - a single purchase into its pooled portfolio makes your diversification more cost-effective. Some funds have minimums as low as $1.<h3>3. They are passively managed</h3>Many casual investors aren't interested in managing their investment; they just want to steadily grow their money. Index funds don't require any decisions, so they're great for hands-off investors.<h3>4. They have the lowest costs and fees</h3>Index fund managers don't make many investment decisions, so they don't need to hire researchers or analysts. Those cost savings are passed on to investors through lower management fees and costs. The average expense ratio of an index fund is around 0.49% and some are as low as 0.03%.<h2>Disadvantages of index funds</h2>Index funds also come with disadvantages and risks:<h3>1. They're not great for short-term gains</h3>A diversification strategy limits how much you lose if a single stock tanks, but it also limits your opportunities to gain on well-performing stocks. That's why index funds don't see the big upswings that some investors are hoping for. If you're looking to speculate on a skyrocketing star, you'll want another type of product (perhaps <a href="https://www.businessinsider.com/what-are-penny-stocks" target="_blank" rel="noopener">penny stocks</a>).<h3>2. They're vulnerable to the market</h3>By their nature, index funds are tied to their index. If the benchmark is dropping, so will the value of your index fund investment. And management's hands are tied. "Index portfolio managers typically can't deviate from the index holdings-even to take advantage of trends or market mispricings," says Tricia Rosen, Principal at <a href="https://accessfinancialplanning.com/about/" target="_blank" rel="noopener">Access Financial Planning</a>. And they can't exclude holdings that are over-valued, either." <h3>3. They may not be as diversified as they appear</h3>Brian Berkenhoff of <a href="https://birchinvestment.com" target="_blank" rel="noopener">Birch Investment Management</a> notes that "an investor who has $1,000,000 in an S&amp;P 500 index fund would seem to be diversified by owning 500 stocks. However, because most index funds weight investment by market capitalization, $220,000 of that might be invested in just five companies."Case in point: The top five companies in the S&amp;P 500 are Apple, Microsoft, Amazon, Facebook, and Alphabet - all players in the tech sector. So if that sector tanks…. <h2>Before you invest in index funds</h2>Rosen suggests that anyone considering an index fund should read the fund's prospectus to understand:<ul><li>What index the fund follows. There are many different indexes and some funds use a blend of indexes. </li><li>How rigidly the fund follows the index. True index funds rigidly follow the index, but some allow portfolio managers to deviate from the index to try to increase returns.</li><li>The fund's fees and expense ratio. Typically these are low. But they may be higher in funds where the portfolio manager is allowed to do more active trading.</li></ul><h2>The financial takeaway</h2>Index funds are popular because they are a low-risk, low-maintenance, low-cost way to see steady returns over time. But no investment is one-size-fits-all. To see if they suit you, ask yourself:<ul><li>Am I looking to invest for the future? Index funds are best suited for investors with a long-term horizon: While the market historically rises over time, you do need time to weather the bumps..</li><li>Am I the buy-and-hold type? Index funds are ideal for those who aren't interested in picking stocks. </li><li>Am I comfortable with slow gains? Index funds typically perform better than actively managed funds over time, but gains are usually moderate. Actively managed funds can sometimes see higher returns in the short-term. </li></ul>Any investment has some risk attached to it, of course. But index funds rank fairly low on the risk spectrum - and are certainly more cost-effective than trying to buy stocks on your own."Investors simply can't afford to make oversized bets on individual securities," says Johnson. "Investing in a broadly diversified basket of securities is a more prudent strategy."<a data-type="613a2035b0b35f5c695cf174">5-step beginner's guide to investing in index funds</a><a data-type="5f886ff851467218126c05d1">Passive investing is a long-term wealth-building strategy all investors should know - here's how it works</a><a data-type="60149b639614fd439e525cd9">The S&amp;P 500 is seen as a gauge of the stock market itself - here's how this widely watched stock index works</a><a data-type="6112d5a1e278c61be35359e8">Index funds vs. mutual funds: What's the difference?</a>

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