Such funds invest their portfolios only in stocks that comprise a particular index, in the same proportion in which they are represented in the index. As a result, the performance of such funds mirrors the performance of the index. Sounds interesting? The mutual fund sector in India has a variety of such funds, so investing in an index is truly within your reach.

In fact, the mutual fund sector goes a step further to offer you funds that not only mirror an index but whose units can be traded on the stock exchange in much the same way as a common stock. These funds are called 'Exchange Traded Funds' or ETFs.