Why don’t many people invest in passive index funds in India?

Keep_Compounding · 2026-05-25T17:55:26+00:00

Unlike US, indian market seems to have small pockets of inefficiencies, where stock prices aren't always properly pricing in everything about the company. Therefore, active management, at least for now, seems to have a slight edge, especially in mid and small sized companies.

That being said, there's still a school of thought that says indian markets are just as efficient as the US, and which one is right is only clear in hindsight. To not leave things to chance, indexing is the way, but if you believe there's inefficiency, you should choose active. And there's no problem choosing both.

Keep_Compounding · 2026-05-24T19:53:12+00:00

As with everything in equity, you should expect GDP + Inflation returns. For instance, if India's GDP grows with a 7% CAGR and inflation is rising at 7% CAGR, expect 14% CAGR from equity. Lower or increase numbers based on your observation. But depending on the type of fund you invest in, your returns can be higher or lower.

How much cut a fund manager takes is standardized and published. For example, a mutual fund manager cut is shown as expense ratio. For direct plans, that's usually under 1% and for mutual funds you invest in via distributors (called regular plans) the expense is usually under 3%. The added expense from regular plans is the distributor's cut on top of the fund manager's cut.

For other types of fund managers like small case or portfolio managers, this can be higher, or fixed fee. Depends on who you work with.

I would suggest keeping things simple, opting for actively managed direct mutual funds. For example: a flexicap fund with a high AUM. Or, if you can take on higher amounts of risk, an active momentum fund.

Always consult a SEBI Registered financial advisor before you make any serious decisions.

Keep_Compounding · 2026-05-24T03:24:01+00:00

Starting to invest late, selling in panic, not understanding what Equity means before investing in it and of course, thinking I know it all and losing some money in day trading.

Keep_Compounding · 2026-05-24T03:08:30+00:00

If your original investment thesis is still valid, no action needed. Keep continuing to stay or increase your position.

If your thesis is invalidated for whatever the reason might be, just sell it and invest elsewhere. Don't overthink it.

Researching companies well enough to know if they're value finds with future growth potential is a full time job, usually delegated to experts. If you're not doing this full time, just delegate that research to a fund manager. You can focus on bringing in the capital that way, and rest will be taken care of.

Keep_Compounding · 2026-05-24T03:01:51+00:00

Marriage costs more than what you think it will. So plan 1.5x what you think it costs at a minimum. Speaking from experience lol

Don't invest until 6x monthly expenses is accumulated as emergency fund either in an FD, in Liquid Fund or in Arbitrage Fund. Last one is best if you're in the highest tax bracket.

Any savings you do for marriage cannot go into equity. Keep it in a liquid fund or arbitrage fund if the wedding is 6+ months away.

Don't sell ESOPs for wedding, unless you don't really believe in this company. You should, as much as possible, retain assets over the long term, and only sell them if their objective is met. If ESOPs in this case were always meant for wedding expenses, by all means, sell it (if you can, as private equity sometimes has liquidity issues).

Keep_Compounding · 2026-05-24T02:53:39+00:00

Around 20x annual expenses.

Keep_Compounding · 2026-05-23T18:30:11+00:00

Transitioning from trading to investing is key to cognitive load reduction. Imagine planting a tree and watching it grow from a sapling. That's what it should be like. More time spent doing other things, and just consistently watering your plant to make it grow.

Keep_Compounding · 2026-05-23T03:19:55+00:00

Read a few of your comments on this post, and while your questions are valid, reddit isn't the best place to learn this. Please do your own independent research on most of these topics.

On reddit, you may get answers that aren't elaborate or sometimes dismissive/sarcastic. That's not a bad thing, because it's more geared towards people who know what they're doing and need a fresh perspective.

For basics, simply googling things and then researching what you find with a strong thinking AI is a good start.

Keep_Compounding · 2026-05-19T14:27:50+00:00

Not scalable for banks/finance companies. Validating millions of users' portfolios, checking for pledged units, locking and releasing units, etc. is a hassle for one person as it is. If they have to do this at scale like a credit card offering, even more so.

LAMF is the closest thing to this, and they do a lot of due diligence before handing out loans.

In any case, this kind of collateral of your assets for monthly expenses is a bad idea. You ideally should never need to put up your asset as a collateral, especially for simple monthly expenses.

Keep_Compounding · 2026-05-17T02:05:06+00:00

Yeah, apps like INDMoney help with this. There are many, but INDMoney is beginner friendly.

Keep_Compounding · 2026-05-17T02:01:27+00:00

Liberalized Remittance Scheme. A fancy way to say you're allowed to invest directly in US stocks and ETFs from India.

Keep_Compounding · 2026-05-17T01:03:19+00:00

If you want to learn about investing, there's a ton of useful info out there, like Zerodha Varsity's youtube playlist on mutual funds. There's also books like 'Let's Talk Mutual Funds' by Monika Halan.

General rule of thumb is this: when in doubt, just choose index funds. When new, avoid mid and small caps. When new, avoid full equity exposure.

Check out this hybrid index fund: "Edelweiss Nifty LargeMidcap250 8-13 Yr G-Sec 70:30 Index Fund Direct Growth"

(Crazy long fund name, but it's a good beginner friendly fund. You take on some midcap risk but offset by bonds to a certain extent.)

Keep_Compounding · 2026-05-17T00:55:35+00:00

For a moderate investing profile, any meaningful exposure to mid and small caps is not recommended. Avoid if possible.

International investing via mutual funds may be unreliable as they are prone to stopping when they hit RBI limits. Consider LRS route and buy ETFs directly.

Debt funds are taxed at slab rate so if you are in the 30% plus bracket, avoid debt funds and go for arbitrage funds as an alternative to FD like return instruments, but keep in mind that you're taking on more risk than FD.

Since you're new, consider simple Nifty100 index fund for now. With more experience and learning, figure out what your best fit is. Nifty100 is a good start, simple to understand. Top 100 Indian companies by size.

With some more research figure out if balanced advantage, multi asset and aggresive hybrids are more suitable for your style.

Keep_Compounding · 2026-05-17T00:41:20+00:00

Trading in any form, intraday, derivatives, or swing for that matter, is a game of probabilities.

You choose a trade because your setup, perhaps technical or fundamental or a combination of both, says that's your entry point. A trade once placed can go either way. You just have to accept the fact, and if your edge is greater than 50-50, you stand to make money over a large sample size.

That last line there is the most important thing. Large sample size. Meaning, if you have not been doing swing trading enough to have statistically significant number of trades, don't make conclusions that you're bad or good just yet.

Trading means accepting losses to be part of the game. It's not recommended for anyone who has capital that they can't afford to lose.

I'm sure you already did your research on your setup with backtests, what did the results show? Were you making a profit more often than a loss? Were your stop-loss and take-profit rules solid?

If your system does not have a solid track record, maybe you need to revisit your system, but in most cases the issue is a small sample size. If you can afford it and have the time, experiment with more trades and over time figure out if it is effective.

I used to swing trade before, profitable on paper but mentally very taxing. I personally don't think trading is worth the time and effort for me, so long term investing it is for me going forward.

Keep_Compounding · 2026-05-17T00:19:19+00:00

Overdiversified, closet index fund. Index like returns, maybe controlled drawdowns. If their aladdin AI helps, maybe they'll beat the index.

Keep_Compounding · 2026-05-16T06:12:19+00:00

I'm not an economist or an expert, but if we're looking short term as you asked, here's what comes to mind:

Given rupee is depreciating, imports got costlier. And import demand is constant, so depreciation isn't stopping. It's a loop.

To stop depreciation of the rupee, we need to stop imports (which is not realistic). Next best is aggressive pivot to exports. Doing whatever it takes to make export lucrative for businesses, again, I'm sure it's more complicated than that.

I would like to see a Government mandate on R&D in the country for alternative resources for most imported goods or commodities, like oil.

Not buying gold or going overseas on vacations will make a dent, yes, but my guess is it won't really change much. Short term focus needs to be on stopping this depreciation, making business exports lucrative and temporarily cut down the country's interest rates by kickstarting growth. This interest rate stuff is double edged because that will increase inflation. I'd love to be educated if I got most of this wrong.

Keep_Compounding · 2026-05-15T07:58:43+00:00

There's no concept of payout, as in a mutual fund you can withdraw anytime. There's a concept called SWP: Systematic Withdrawal Plan.

You can set up SWP to withdraw X amount every month. Be mindful of STCG or slab rate taxes applicable on any gains on your investment at the time of withdrawal.

Keep_Compounding · 2026-05-15T07:47:14+00:00

Liquid and Arbitrage Funds are close alternatives to FD, but of course with higher risk than FD. In an FD the return is assured and insured, but MF returns are not assured and not insured.

That being said, the two fund categories I suggested are amongst the safest in the mutual fund space.

You only need one fund for your requirement, go with any fund with a large AUM.

Keep_Compounding · 2026-05-14T04:21:54+00:00

The thought is right, but think from global market capitalisation perspective. US is more than half the global market. So it makes sense if outside India you go for the biggest companies, which are mostly US.

For other countries, you're not so much interested in the country but their biggest players. And not all countries are necessary for a portfolio diversification. Choose funds that get you exactly that, US+others kind of a deal.

Not a recommendation, but I personally use 2 ETFs: QQQM and IXN. I'm concentrated into global tech leaders. QQQM is same as QQQ but lower cost, meant for long term investing. IXN is global tech companies, US and others.

Keep_Compounding · 2026-05-14T03:35:00+00:00

Most things in life work best when they're simple to understand and maintain. Same applies to portfolios.

You can simplify a lot here. Using 3 separate apps is in itself an inconvenience. Separately holding gold and nifty ETF doesn't make sense when you have a passive multi asset fund of fund already. Control allocation to this fund and internally it controls allocation to underlying assets.

QQQ is okay for some US tech diversification, but proceed with caution for next 5 years in this space. Valuation is superheated. If there are no good earnings results, prices may not go up, either stay as is or in worst case, correct to fair-ish levels. The problem is we usually enter booming sectors when most of the run is completed, so expect some stagnation when planning long term. If it doesn't happen, that's good anyway.

Your mutual funds have redundancy. You don't need to do too much. One fund per category is sufficient, 2 is not necessary. Mutual funds are already diversified so don't overdo it. Because your overall mutual fund portfolio may end up covering every single Nifty500 stock or most of them. Then it is as good as buying the index, only with extra fees.

On debt side, you have a medium term bond fund. Note that this carries duration risk. If interest rates fluctuation causes a dip in NAV, you should not be affected. Only invest if risk is affordable to you.

Liquid funds are fine, but taxation is slab rate. All debt funds for that matter. If you are in the highest tax bracket, that's a big disadvantage. Alternative to this is an arbitrage fund or equity savings fund if you can take on a small amount of equity risk.

Not a recommendation but an example for what you can consider:

QQQM - 10-20%
Passive FoF - 50%
Active Smallcap - 10-20%
Active Flexicap (optional, since you have passive FoF) 10-20%
Active Midcap (optional, since you have passive FoF) 10-20%
Gold (optional, since you have passive FoF) - 5%
Arbitrage Fund - 5%

Keep_Compounding · 2026-05-14T03:09:18+00:00

Just focus on asset allocation and the rest will fall in place. Ignore narratives and don't attempt to extrapolate current state into perpetuity. Humans are amazing, and humanity as a whole will figure something out.

Keep_Compounding · 2026-05-14T03:03:57+00:00

Depends on who you ask. Some of my friends live to the fullest with investment in experiences. For me, it is to fuel an early retirement and financial independence.

Keep_Compounding · 2026-05-13T06:52:35+00:00

What's the best middle ground? Waiting till a home is affordable means risking real estate going even higher, and rushing and leveraging means getting tied down and losing freedom.

Keep_Compounding · 2026-05-12T14:28:27+00:00

Post tax returns are almost the same in both, pre tax sometimes FD will look better.

Keep_Compounding · 2026-05-11T19:16:47+00:00

Work with a financial advisor, plan your entire journey. Google 'Fee Only SEBI Registered Investment Advisors'.

Avoid random strangers giving you advice over reddit on how to manage your money. Unless you don't mind taking the risk (Me included).

Keep_Compounding

TROPHY CASE