How to use Index Funds in your portfolio: Key advantages, drawbacks & advice by Dhirendra Kumar

In this episode of Investors' Hangout, Dhirendra Kumar, CEO of Value Research, explains how to effectively use index funds in your portfolio. He answers key questions, including:

00:44 What are Index Funds?
01:47 What are the advantages and drawbacks of Index Funds?
04:21 How should investors incorporate index funds into their portfolio?

Discover how index funds offer simplicity, low costs, and broad market exposure, and learn the best strategies for using them to build long-term wealth.
If you're considering index funds for your investments, this session is a must-watch!

Viewers' Questions:
06:25 I am a 78-year-old mutual fund investor. My only son and his
family depend on my monthly pension of ₹1 lakh. Please explain how I can insert my son's name as a second holder instead of the nominee with an option of either or survivor, and add another nominee. This is to make easy transitions after my demise.

08:01 What is the best method to take a tactical call to benefit from the
likely ensuing interest rate cut? Should we invest in government
securities funds or long-duration funds now or through an STP for the next three to six months? I already have about ₹25 lakh invested in short-term debt funds for about three years, and the annual returns are about 5.5 to 6%.

09:00 Key Takeaways -
- Index funds mirror a market index, offering a portfolio of stocks in the same proportion, making it easy to match market returns.
- Simplicity, predictability, and low cost are key benefits of index funds, as they require no active management and track the index closely.
- Settling for average returns is a drawback, as index funds won’t outperform the market. Larger companies can dominate, and underperformers remain in the portfolio.
- Index funds are ideal for large-cap allocation, covering 40% to 70% of a portfolio. They provide cost savings and closely match market performance.
- Combine index funds with small-cap, multi-cap, and sectoral funds to balance low-cost stability with potential growth across market segments.

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Thanks for Watching - How to use Index Funds in your portfolio: Key advantages, drawbacks & advice by Dhirendra Kumar

[lalitoberoi]

Is there a fund with Momentum, Value and Growth. All in one.

[asinghal]

Apart from largecap vs Nifty50 comparison, it would have been good if you would have given your views on Midcap active Vs Midcap Index, Smallcap active Vs Smallcap Index. Also these days there are few momentum index funds which claims to be back tested and give better performance then there index.

[hpjoshi]

Can you please make a video on performane of dedt funds in case the interest rates are reduced by the RBI. I am a senior citizen and wish to invest in debt funds.
Thanks & Regards,
H P Joshi

[dharmendrakapur]

Sir, the Registrar CAMS is not aware that we can add a second holder, you shall have to educate them on this. Regards

[hakim]

75% of my portfolio is of Index funds including Smart Beta Index funds as the time goes it will be harder and harder to beat Indices for active fund managers just like in US. Active largecaps have already started to underperform.

[TROYELLIOT]

Your website shows nifty 50 index funds as rated 2 stars. So how does you saying large cap are not beating the index. Doesnt makes sense. Why 2 stars. Pleaee confirm uti, sbi, hdfc nifty 50 index funds which you are talking about?

[yugandharreddynalabolu]

Nifty 500 momentum 50 index fund is recently came to NFO. is it good?

[Nilkamalsha]

Can someone invest in momentum based passive fund ? Even if already have active fund? ❤

[cgandham]

I didn't understand what he means by "invest in large cap through index funds"

[KMaji]

If someone doesn't appreciate that it is impossible today to identify a future winner active fund, better not to pick passive funds. At any point of time some active funds of a given category will beat underlying index and rest are not. Active management is an added risk on the top of usual risk in equity investment.