A smarter way to invest

For a long time, active investing dominated the investment landscape. The allure of picking winning stocks, the thrill of trying to beat the market and the promise of star fund managers have kept investors engaged. However, the numbers tell a different story. Over long periods, most actively managed large-cap funds struggle to outperform their benchmarks consistently. Yet, investors continue to pay high fees for the promise of superior returns - returns that often fail to materialise.

At Value Research, we believe that smart investing is not about chasing the next big thing but about making rational, evidence-based decisions. This is why we are launching 'Index Investor', a dedicated initiative covering index funds and ETFs (exchange-traded funds) - a category that, while simple in concept, has the potential to fundamentally improve investor outcomes.

Why index funds?

An index fund does exactly what it promises - it tracks an index. Whether it's the Nifty 50, Sensex or broader indices like the Nifty 500, these funds mirror the market rather than attempting to beat it. The result? Lower costs, greater transparency and a more predictable investment experience.

One of the most underappreciated factors in investing is cost. Actively managed funds charge significantly higher fees, which erode returns over time. In contrast, index funds (and ETFs) offer a cost-efficient alternative. Unlike active funds, they don't require expensive research teams, complex trading strategies or frequent portfolio turnover - allowing investors to retain more of their returns.

What we aim to achieve

Through Index Investor, we want to raise awareness, dispel myths and provide actionable insights on index funds and ETFs. Our goal is to help investors understand how to integrate them into their portfolios to optimise performance and minimise costs.

This initiative will include:

• A dedicated 'Index Investing' section on Value Research Online explaining the fundamentals - what index funds and ETFs are, how they work, their advantages and limitations and how to select the right ones.
  
• Podcasts and webinars featuring experts discussing how best to leverage index funds.
  
• A comprehensive listing of index funds and ETFs with data-driven insights into their performance.
  
• A monthly 'Index Investor newsletter' to keep investors informed.
  
• Exclusive features in Mutual Fund Insight and Wealth Insight, ensuring both beginners and experienced investors have the right information to make informed decisions.

We are proud to partner with Nippon India Mutual Fund in this endeavour, bringing investors high-quality insights and resources on index investing. Their expertise in passive investing complements our mission to empower investors with knowledge.

Passive investing: The future of investing?

The case for passive funds is not just theoretical. Across global markets, passive investing has been gaining momentum. In the US, more money now flows into passive than active funds. India is catching up, with a growing range of index funds and ETFs that enable investors to build low-cost, diversified portfolios.

However, passive investing is not as simple as buying an index fund and forgetting about it. Investors still need a strategy - choosing the right indices to track, rebalancing portfolios, blending active and passive approaches and optimising taxes. That's where we come in.

Through our focused coverage, we aim to ensure that investors don't just adopt index funds but use them effectively. This is not a passing trend - it's a smarter and more structured way to invest.

An investor education and awareness initiative of Nippon India Mutual Fund.

Helpful Information for Mutual Fund Investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under 'Intermediaries/Market Infrastructure Institutions'. For redressal of your complaints, you may please visit www.scores.gov.in For more info on KYC, change in various details and redressal of complaints, visit mf.nipponindiaim.com/InvestorEducation/what-to-know-when-investing

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

This article was originally published on April 17, 2025.