Below I list 3 simple financial products which by design are superior and riskless, yet undersold in India
- SIP of Index Fund:- An index fund passively replicates the returns of the index. If markets are fairly efficient, then it is difficult for active fund managers to obtain excess returns after considering extra fees and costs. This should be largely true for Indian largecaps(but not for midcaps/small caps). And SIP makes us disciplined investors.
- Term Life Policy + Health Insurance:-This would substantially replace the income and ensure a similar quality of life, in case any misfortune happens.
- Pension fund(preferably NPS):-The magic of compounding and forced savings(saves us from ourselves
Like all good things, index funds come with some drawbacks like
(1) Distorted cost of capital for index stocks
(2) Inferior corporate governance
(3) Diminished market efficiency
(4) Enhanced concentration in the fund industry
And an India specific reason is that markets are decisively NOT efficient(this is the major premise of Index funds). As an investor in Indian equities would know, In India, market inefficiencies may still arise on account of:
(1) Poor information access: inferior disclosure laws
(2) Inferior human capital
(3) Higher transaction costs
Takeaway:-While I would still suggest the holy trinity of personal finance for anyone(and you can do all this online nowadays without human interaction), I would understand if people decide to avoid index funds!