Putting money into the stock market might worry you, but the Sensex Index gives you a manageable and reliable way to grow your money over time. The Sensex includes 30 of India’s biggest, most financially sound companies.
People see it as a barometer of India’s overall economy and it can serve as a suitable investment instrument for new investors. In this article, let’s look at 5 methods to invest in the Sensex.
1. Invest via Index Funds
One of the easiest ways to invest in the Sensex is through index funds. These Sensex funds track how the Sensex performs and include stocks from all 30 companies in the index. The plus side? You don’t have to research individual companies; the index fund does this for you.
- Low Initial Investment: You can begin with just ₹500 making this a good starting point for new investors.
- Lower Costs: Since index funds are passively managed (the portfolio follows the index), they have lower management fees compared to actively managed funds.
- Diversification: Index funds spread your investment across different sectors, which cuts down the overall risk.
- Expert Management: Mutual fund managers adjust portfolios based on market trends and changes in the index, which saves you time and energy.
2. Exchange-Traded Funds (ETFs)
ETFs are similar to index funds but are traded like stocks on the exchange. This allows you to buy and sell them all day giving them more flexibility than regular index funds. ETFs that track the Sensex provide similar advantages: low costs, diversification, and easy access to the Indian market.
- Liquidity: Because ETFs trade on the stock exchange, you can sell them at any time during market hours.
- Low Expense Ratios: Like index funds, ETFs charge low fees making them a cost-effective way to invest.
3. Direct Investment in Sensex Companies
Another option to put money into the Sensex involves buying stocks of the companies that make up the index. This approach requires a deeper grasp of the market and each company’s results.
You can select which companies to invest in, but this method needs more study and ongoing tracking of the market.
- Potential Returns: If you choose the right stocks at the right time, you might see better returns than from index funds or ETFs.
- Flexibility: You have full control over which companies you invest in and how long you keep their stocks.
4. Systematic Investment Plan (SIP)
SIPs let you put a fixed amount in mutual funds or ETFs at regular intervals, which is a great way to invest in the Sensex gradually. Rather than investing all at once, SIPs spread your money out over time. This helps to cut down on risk and ensures that you buy more when prices drop and less when they go up.
- Rupee Cost Averaging: SIPs take advantage of rupee cost averaging. This evens out the cost of investment by buying units at different prices over time.
- Discipline: SIPs turn investing into a habit. You keep adding to your portfolio, which can lead to building wealth in the long run.
You can use a SIP calculator when you start investing in SIPs.
Benefits of Sensex Investment
Now, let’s discuss the benefits of investing in the Sensex:
Diversification
When you put your money in Sensex-linked products, you spread it across different sectors like IT, banking, healthcare, and energy. This helps to cut down on risk.
Long-Term Growth
The Sensex has historically provided strong long-term returns. In the last ten years, it has given an average return of about 10-12% annually.
Lower Risk
Sensex index funds or ETFs cut down on risk compared to buying single stocks. They do this by investing in many blue-chip companies.
Conclusion
For young investors, the Sensex serves as a doorway to take part in India’s economic growth. You can get exposure to the country’s leading companies without much effort through index funds, ETFs, mutual funds, or even SIPs. Pick the investment approach that matches your style, and keep in mind that investing takes time—it’s a long-term process.
