Module 3 of 5 in Investing and portfolio management
Mutual funds, index funds, ETFs, REITs and InvITs
How pooled investments work, active compared with passive funds, expense ratios and tracking error, and the basics of REITs and InvITs.
5 lessons in this module. Progress is saved in your browser as you go.
Most people own shares through funds. This module explains how mutual funds and ETFs are structured and regulated in India, what you pay for them, how index funds track an index and how closely they succeed, and how REITs and InvITs give access to property and infrastructure income.
By the end of this module you should be able to
- Explain how mutual funds and ETFs work, including NAV, units and fund categories.
- Compare index funds and actively managed funds on cost, tracking error and evidence on performance.
- Calculate the effect of expense ratios over time and interpret tracking error.
- Describe REITs and InvITs, how they earn and distribute income, and their risks.
Lessons in order
Module test
10 questions, chosen at random from a bank of 31 questions and balanced across this module's learning goals and difficulty levels. Every question comes with an explanation. You need 80% to pass, and you can retake it as often as you like with a fresh set of questions.
This module builds on
- Diversification: Funds are one of the simplest ways to diversify, as that lesson explains.
- SEBI, brokers and demat accounts: Funds are regulated intermediaries, like the brokers and depositories described there.
- Nifty 50 and Sensex: Index funds track indices such as those explained there.
- Compounding and CAGR: The effect of costs grows through compounding.
- Misleading numbers and charts: Survivorship bias in fund data is a form of the misleading statistics explained there.
- Equity and fixed income: Their units behave partly like shares and partly like fixed income.