(Photo: Mint)
(Photo: Mint)

Chart of the day: Amateur investors in India are warming up to index funds

  • Index funds and exchange-traded funds (ETFs) now comprise a shade over 14% of total equity assets under management
  • Investors are assured of the index performance, without the uncertainty of an active fund

An index fund is a most unlikely hero for a typical investor. It is no more (nor less) than a broadly diversified portfolio, typically run at rock-bottom costs, without the putative benefit of a brilliant, resourceful, and highly skilled portfolio manager," said John C. Bogle, who is considered the father of the passive investment strategy of tracking returns of stock indices.

Indian investors seem to be finally heeding Bogle’s sage advice. Index funds and exchange-traded funds (ETFs) now comprise a shade over 14% of total equity assets under management. This used to be under 1% five years ago.

(Graphic: Naveen Kumar Saini/Mint)

Part of the reason for this is that the brilliant, resourceful and highly skilled portfolio managers in India have found it nearly impossible to beat index returns in the past year.

Besides, while a passive investment strategy seems boring, fund management costs are considerably lower. And at the very least, investors are assured of the index performance, without the uncertainty of an active fund.

That’s why The Economist in a recent obituary on Bogle called him the “patron saint of the amateur investor". Looks like India’s club of amateur investors will agree.

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