Methodology

Market beta generates market returns, while Alpha represents additional returns. However, a staggering 92.5% of active fund managers are unable to offer either Alpha or Beta, as per S&P Global reports. Despite this, they take away 25% to 30% of your wealth as charges. (i.e., 1cr Lumpsum for 20 years @12% Maturity Rs 6.72cr & Rs 2.91cr are the commission charges by the active manager).

At Index Funds Sahi Hai, we help the client to generate Alpha using effective diversification & low-cost investing, & Tax optimization using alpha on index technology. If you hold the index fund, you will grow with India.

It is possible to study the behaviour of various asset mixes via the use of historical data. These techniques are used in Alpha on Index technology,

• 1. The addition of a small amount of Equity to a bond portfolio increases returns slightly; even the most risk-averse investor should own some equity.
• 2. The addition of a small amount of Bonds to an Equity portfolio significantly reduces risk while reducing return only slightly.
• 3. Favor short-term bonds (of six months to five years) as your risk-diluting asset rather than long-term bonds.
• 4. The small-cap has to be diluted with more bonds than the large-cap index in order to obtain the same degree of risk (i.e., a 50/50 small cap and Bond mix have about the same degree of risk as a 75/25 large cap and bond mix.
• 5. Beware of recency, and do not be overly impressed with asset-class returns for less than two or three decades.
• 6. Periodically rebalance the portfolio back to your policy allocation. It will increase your long-term return and enhance your investment discipline.
• 7. Keeping the cost in check since we use only low-cost index funds/ETFs to build the portfolio.

The four major types of asset classes to build your portfolio:

• Equity Index: These represent the basket of a company, also called Equity Index funds or Exchange Traded Funds.
• Strategy Indices: Strategy indices are designed on the basis of quantitative models/investment strategies to provide a single value for the aggregate performance of a number of companies
• Fixed Income Aggregate Index: Fixed Income Aggregate Indices consist of 13 indices that measure the performance of various fixed income portfolios covering Government securities, corporate bonds of different credit rating categories, Commercial papers, Certificates of deposits, T-Bills and Overnight rates.
• Multi-Asset – Equity : Debt : Arbitrage : REITs/InvITs (50:20:20:10) Index is designed to measure the performance of multi-asset portfolio having 50% exposure to Nifty 500, 20% exposure to Nifty 50 Arbitrage, 10% exposure to Nifty REITs &InvITs and 20% exposure to Nifty Medium Duration Debt Index.