As the markets are very volatile, should I invest in index funds to be safe?
—Uday Rathore
Equity index funds invest in stocks by typically replicating a benchmark equity index such as the S&P BSE Sensex, Nifty, etc. They buy all the stocks which are in the benchmark index in the same proportion or weight. The objective being to provide a passive exposure to the index without taking any active calls in terms of either stock exposures or weightages. This strategy varies from an actively managed equity fund wherein a fund manager actively manages the portfolio by buying or selling stocks which might vary from those held in the index. Index funds are also subject to equity market related volatility which may be higher or lower than that of an actively managed fund.
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