Index funds are well-suited for almost everybody’s investment portfolio. When you invest in index funds, remember to identify your risk tolerance. Invest the amount in index funds that you would be ready to tolerate for an equivalent amount of price volatility in the equity market.
Manage risks through efficient diversification
Thanks to their low fees, index funds are an excellent alternative for long-term investment.
For long-term investors, it pays to manage risk by diversifying sensibly. When you invest regularly once a month, you can spread your investments across several investment vehicles – you diversify efficiently and reduce risk. With one index fund investment, you can diversify your investment in equity markets globally.
You can make an agreement for a systematic investment plan for the amount of your choice. You can of course cash in your fund units quickly anytime you need the money.
This is how index funds accrue returns:
- The money invested in index funds are invested in the equity market in accordance with the index composition.
- The fund automatically reinvests dividend payouts from shares in line with the benchmark index, so they benefit fund unitholders through the increase in fund value. When you make long-term investments in funds, you also benefit from other investors’ subscription and redemption fees as they are added to the fund’s assets.