The number of people who advise investors to invest in Index funds is now increasing. Of course many of them are victims of the Great American media program.
As long as Prashant Jain, Naren Sankaran, Nagnath, Sukumar are managing funds for me for a 2% fee why should I ‘index’ my portfolio? There are many fund schemes in my portfolio that beat the index. There are many shares in my portfolio which beats the index by a mile.
It may make sense in the USA to index your portfolio – perhaps the index is far more indicative of the market and a Russell 5000 is available. In India the only 2 indices available are the Sensex and the Nifty. To me both are not great indices. The market cap and free float biases means good profitable companies can almost NEVER reach the index.
My Cummins, Coromandel Fertilisers, EID Parry, will never be in the index and ITC will be the biggest part of the FMCG index – and that is because it has a capital intensive business like hotels. Just creating a portfolio and staying out of Hpcl, Bpcl, IoC you could have beaten the index. If the govt. develops the guts and frees gas and petrol prices, then things could be different. However a sensex dominated by one owner to me is huge risk.
Since Indian indices have a major construction problem I am happy with my fund managers and my adviser who picks a far superior portfolio for a small fee.
So as long as the fund managers are beating the index stay in them. Once the index gets the better of the fund manager shift to Index funds.
Till then stick to the broad well diversified equity funds like Hdfc Equity, Templeton India Growth fund, Icici prudential Dynamic or Discovery fund….just to name a few.
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