Make Money: Aditya Birla Sun Life Mutual Fund has launched two index funds. Both schemes will be open till 26 March. In any one index fund, all indexes of that index have a common ratio.
Aditya Birla Sun Life Mutual Fund has launched two new index funds on Thursday. Both these index funds are named Nifty Midcap and Nifty Smallcap. The Nifty Midcap 150 is an open ended scheme of the index fund, in which the Nifty Midcap 150 Total Return will be tracked. The Smallcap Index Fund is also an open-ended index fund, in which the Nifty 50 Smallcap 50 Total Return will be tracked. The company has given information about this. Both schemes have now opened and will be open till 26 March.
Balasubramaniam, chief executive of Aditya Birla Sun Life AMC, said that the current market position for midcap and smallcap is better. Cyclical recovery is being seen. It will continue to see even better performance. Experts say that in mutual funds scheme, FDs usually yield double returns.
What is midcap and smallcap?
Midcap: According to Sebi’s clarification, companies that fall between 101 and 250 rank in terms of market capitalization are called midcap companies. Typically, these companies have a market cap of between Rs 5,000 crore and Rs 20,000 crore.
Smallcap: Based on the market cap, companies with more than 251 rank are smallcap companies. Generally smallcap companies have a long track record. It also has these companies which are new start-ups or in terms of business, they are still in the development stage.
Index funds help in portfolio diversification
An index fund has a common ratio of all its stocks. Index funds do not have to be actively managed, so its management expenses are also low. Through this, investors manage their funds and they also get help in diversifying their portfolio. This allows an investor to adjust risk and return.
What are the things to keep in mind before investing in such funds?
Risk: Since index funds map an index, it is considered a better option to generate higher returns. However, it is very important to manage it during the market downturn. The investor should take a decision only after estimating the risk.
Returns: Index funds have slightly lower returns than funds that are actively managed.
Spend: Generally, the expense of managing an index fund is 0.5 per cent or less. The expenses of funds that are actively managed are around 1 to 2.5 per cent.
Tax: If an investor exits an index fund, then he has to pay capital gains tax. The tax rate on this depends on how long you have invested in it.
