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Index funds are generally considered ideal core portfolio holdings for retirement accounts, such as individual retirement accounts (IRAs) and 401(k) accounts. Index funds have lower expenses and fees than actively managed funds. Index funds follow a passive investment strategy.
Which index fund you invest in depends on how much risk you are willing to take. All index funds will have risk as they are completely invested into equity. You can go for a large cap index fund like Nifty 50. There are also midcap and small cap index funds available. Even an index fund tracking the Nifty 500. You can choose a fund depending on your risk appetite and investment horizon. An index fund basically invests into the basket of stocks tracked by a particular index in exactly the same weightage. They basically eliminate fund manager bias and are low cost funds. Returns will replicate the underlying index. The variance will be due to TER and any tracking errors. Also active funds have the added advantage of holding cash, having part of the portfolio in debt and also selling off or buying specific stocks based on their performance.