All About Index Funds

So basically two-bit to understand here the Index bit and the Fund bit,

Fund Bit is basically wherein investors will pool their money, so multiple inverters would invest in the same funds, and then that fund would have a fund manager and the fund manager decides which companies the fund is going to invest in. Here like suppose I'm managing a fund and like a 100 people have invested around 100 million, so everyone invented 1 million each. I'm gonna put 20% of that in Apple, 10% in Facebook, 10% in tesla and various other stuff and so you, the investor don't have to worry. about this. And because the prices of their stocks and shares increase, you get the returns and I take a 1% or 2% management fee, so I make a load of money because I'm earning 1% or 2% of these a 100 million that I'm managing and your not worrying having to pick stocks yourself. Now that's what a Fund is.

Now the Index bit refers to a stock market index, which is a fund that automatically invests In all of the companies in the index. So firstly index funds are really, really easy to invest in. A big problem that beginners have to invest its like, well how the hell do I know which companies to invest in? how do I read the balance sheet? how do I do any of this stuff? If you invest in Index funds you don't actually have to worry about any of that. 

Secondly, index funds give a decent amount of diversification, there are all sorts of companies listed in it, You don't need to rely just on tech, clothing sector or the oil sector or anything to make the bulk of your money. You are very nicely diversified 

Thirdly, index funds have very low fees, so because it's not a real person who is deciding on what to invest and doing all this research in and trying to make loads of money. It's a computer algorithm that automatically allocates your money based on the components of index funds.

And finally, you look at historical performance, very few funds have managed to actually consistently beat the market i.e outperform the market. Basically, no one can predict what the market is gonna do in the future and therefore if you hit your ride on the index, i.e you gambling on the entire market!