The Nifty50 Index is in deep red owing to fears of Fed rate hikes and deep pessimism, stemming from the recent Adani fiasco, embedded among traders and investors. Geopolitical tensions have prompted many to withdraw their money from the stock market. With some of the best stocks available at such cheap valuations, many investors wonder if it is the right time to enter or re-enter the stock market.
Also, since many investors are not sure of which stocks to buy, hold and sell, they resort to putting their money in index funds. Many mutual fund houses are also coming out with new fund offers in index funds prompting many investors towards passive investment habits.
We asked five personal finance analysts their views on investments in index funds and if this is the right time to invest in a Nifty50 Index Fund. Their responses to the same are as follows.
Muthukrishnan, a Chennai-based Certified Financial Planner said, “Anytime is the right time. Invest in a staggered manner over a period of time.”
Dev Ashish, Founder, Stable Investor said, “It won’t be wrong to say that an index fund will not beat the best fund manager every year. But it will beat the bad ones very easily. And that is very important. Index funds promise index-hugging returns year after year without taking the risk of the fund manager getting things wrong. Earlier the active large-cap funds used to easily beat their benchmark index. But the number of active large-cap funds beating the index has now reduced if you deep dive into the rolling returns data over the last several years. Also, the margin of outperformance of such index-beating active funds has been reducing. So, no doubt there is a growing case to replace active large-cap funds with passive index fund options.”
Suresh Sadagopan, MD & Principal Officer, Ladder7 Wealth Planners said, “It is always a good time to invest in the index as it consists of blue-chip stocks. One need not take the trouble of choosing companies oneself. The index will always have the best companies represented within it.”
CA Kanan Bahl, a Finance Educator and Growth Consultant shares, “Stalwarts of the market say that more money has been lost in waiting for the crash rather than in the crash itself. If you have a lump sum amount to invest in the Nifty 50 Index Fund, maybe what you can do it to invest it in a staggered manner, i.e., in 6-12 months.”
Index investing is always preferred owing to its passive nature. However, many investors continue to ask if they are worth adding to their investment portfolios. The answer is “Yes” considering the need to shift from constantly switching between mutual funds and relying on an index fund that moves in sync with the market.