Index funds are not less risky, according to Edelweiss Chief Executive Officer Radhika Gupta. Her comments come as several investors have been concerned about SIPs because of negative returns, as markets see correction.
In a post on X, Gupta said she has been receiving a lot of investor queries, with many saying they were worried about markets, and have stopped mutual fund SIPs and switched to index funds.
With the markets correcting over 11%, many investors have pivoted from their objective of making gains to protection of principal.
However, even as index funds are often perceived less risky, Gupta has labeled this thought a myth.
"Sorry to break the myth that some strange articles have spread: index funds are not less risky. Buying an active small cap or small cap index fund is the SAME risk — that of small caps. The only additional risk in the active fund is manager performance (could also be outperformance)," she posted.
Equating the risk of index funds with that of actively managed small caps, the CEO batted for different options.
"I'm worried about markets so I have stopped my MF SIPs and switched to index funds."
Believe it or not, I have received multiple posts and messages like this.
Sorry to break the myth that some strange articles have spread: index funds are not less risky. Buying an active…For investors who primarily want safety of funds over gains, she recommends investing into other categories.
"Please don't fall for narratives and choose wisely. Want safety — choose hybrid or debt!" she added. Diversification has been Gupta's key advise for investors, paired with the need to have a long-term investing horizon.
Especially with SIPs, Gupta advocated for a "fill it, shut it, forget it" approach for those who don't want to track markets daily.
The best strategy is holding the SIPs for over 10 years, according to her, as even at the lowest point, lump sum investors made at least 10%, while SIP investors saw 8% returns.
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