Why buy an index fund instead of the index itself?

“If I like the Nifty 50, why not just buy the index directly instead of investing in an index fund?” It’s a valid question. But there’s a catch: you can’t actually buy an index. An index is simply a number—a performance benchmark made up of a specific group of stocks. It isn’t a security or financial instrument you can purchase. What you can do is try to replicate it by buying all the underlying stocks. But while that sounds easy in theory, doing it yourself is anything but simple in practice. Here’s why: High costs, high effort To mirror the Nifty 50 on your own, you’d need to buy all 50 stocks in exact proportions. That means holding large positions in heavyweight stocks like HDFC Bank, Infosys and Reliance. As of April 30, 2025, Nifty 50 stock weightages (based on prices as of May 29, 2025), replicating the index would require at least Rs 8-9 lakh. And even with that kind of money, you’d still face issues. Share quantities can’t be bought in decimals, so rounding off leads to misalignmen

This article was originally published on June 09, 2025.