At ArthVeda, we believe in keeping investing simple, boring, and highly profitable. The best way to do this is through Index Funds. Instead of relying on a fund manager to pick winning stocks, an index fund simply copies a market index (like the Nifty 50 or Sensex). It’s low-cost, transparent, and historically proven to build solid wealth over time.
If you are ready to start your investment journey, here are the top 5 index funds for beginners in India based on low expense ratios, low tracking errors, and high Assets Under Management (AUM).
1. UTI Nifty 50 Index Fund (The Industry Standard)
When you invest in a Nifty 50 index fund, you are essentially buying a small piece of the top 50 largest companies in India (like Reliance, TCS, HDFC Bank).
- Why for Beginners: It is one of the oldest and largest index funds in India. It has a massive AUM, meaning it is highly stable, and its tracking error (how closely it mimics the actual Nifty 50) is consistently among the lowest in the industry.
- Risk Profile: Moderately High (Large-cap focus provides stability).
2. Navi Nifty 50 Index Fund (The Low-Cost Disruptor)
If keeping your costs as low as possible is your primary goal, Navi is a fantastic choice.
- Why for Beginners: Navi disrupted the mutual fund industry by offering one of the lowest expense ratios for a Nifty 50 fund. Over a 10 to 20-year period, saving even 0.10% in fees can add lakhs to your final corpus due to the power of compounding.
- Risk Profile: Moderately High.
3. HDFC Index Fund – S&P BSE Sensex Plan (The Sensex Alternative)
Instead of tracking the top 50 companies (Nifty), this fund tracks the BSE Sensex, which consists of the top 30 largest companies in India.
- Why for Beginners: The Sensex is the oldest index in India. This fund focuses only on the absolute biggest, most established blue-chip giants. It’s perfect for highly conservative equity investors who want minimal surprises.
- Risk Profile: Moderately High.
4. SBI Nifty Next 50 Index Fund (The Future Giants)
The “Next 50” index tracks the 51st to 100th largest companies in India. These are the companies waiting in line to break into the top 50.
- Why for Beginners: While the Nifty 50 provides stability, the Nifty Next 50 provides a slight boost in growth potential. These companies have more room to grow compared to established giants. Adding this alongside a Nifty 50 fund creates a perfectly balanced large-cap portfolio.
- Risk Profile: High (Slightly more volatile than Nifty 50).
5. Motilal Oswal Nifty Midcap 150 Index Fund (The Growth Engine)
Once you are comfortable with Large-Cap funds, the next step is adding some Mid-Cap exposure to accelerate your wealth.
- Why for Beginners: Mid-cap companies are the backbone of India’s growing economy. Active mid-cap funds charge high fees, but this index fund gives you exposure to 150 growing mid-sized companies at a fraction of the cost.
- Risk Profile: Very High (Best for an investment horizon of 7+ years).
The ArthVeda Beginner Strategy
You do not need to invest in all five of these! For a completely new investor, simplicity is key:
- Pick one Nifty 50 or Sensex Fund (e.g., UTI Nifty 50). Allocate 70% of your investment amount here.
- Pick one Next 50 or Midcap Fund (e.g., SBI Nifty Next 50). Allocate the remaining 30% here for an extra growth kick.
- Start an SIP and Forget It. Set up your Systematic Investment Plan and let the Indian economy do the heavy lifting for the next decade.
To see exactly how much a simple ₹2,000 monthly SIP in an index fund can grow over 10, 15, or 20 years, head over to our SIP Wealth Calculator.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully. The funds mentioned above are for educational purposes and do not constitute direct financial advice. Always consult a registered financial advisor before making investment decisions.