How Indexed funds will work? | Different types of Indexed funds

November 10th, 2010| Finance.

How Indexed funds will work? | Different types of Indexed funds

Indexed Funds

In the indexed funds, the fund managers don’t have the right to invest in the shares on his decision. He should invest the money collected from the investors based on the index rates in the market. They should invest only according to the weightage of the shares. For example, if we consider the shares of the NIFT, then they should invest the money in the several shares of the NIFT based on the weightage of the shares.  They should not invest more or less based on the relation with the company. The exchange trades also work in the same but there will be some change in the way of investing. The profits will depend on the changes in the index value. If the index value is reduced, the profits reduce and the same is the case with the increase in the index value which increases the profits.

Different index funds:

There are many types of indexed funds which are available for us like the junior NIFT, bank NIFT, NIFT 500, health care index and FMCG index etc. they can select the funds based on the risk they can cover. For example, they can invest in the government and private indexed banks if they believe that they would get profits.

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