Why are many investment planners not promoting index funds, just the way they do for mutual funds and stocks?

There could be several reasons why many investment planners are not promoting index funds as much as active mutual funds. Here are some potential reasons, along with the stance of Jama Wealth Advisory:

1. Lower Commissions: Index funds typically have lower expense ratios compared to actively managed mutual funds, which means lower commissions for advisors. On the contrary, Jama Wealth Advisory has always suggested direct plans of funds, which are free of commissions, reinforcing their commitment to client-centric advisory.
2. Perceived Lack of Expertise: Recommending actively managed funds or specific stocks might give an impression that the planner is adding value through their expertise. Index funds, being passively managed, may not offer that perceived benefit.
3. Marketing and Promotions: Actively managed fund companies often spend more on marketing and promotions, which may influence the recommendations of some advisors.
4. Past Performance: There have been periods when actively managed funds outperformed index funds, making them more attractive for promotion, though this may not hold true always.
5. Lack of Understanding: Some planners may not fully understand the benefits of index funds or may not believe in the philosophy of passive investing.
6. Client Expectations: Some clients might feel more comfortable investing in funds or stocks that are being actively managed or analyzed, feeling that this increases their chances of getting high returns.
7. Catering to Niche Market: Index investing is still a growing concept in India, and some advisors might prefer to cater to the larger market of active investors.

Jama Wealth Investment Advisory, has always believed in client-centric, low-cost, and efficient investing. We have been recommending direct plans of funds, including index funds, from our inception in 2016, aligning with the philosophy of bringing the best possible value to clients. Investors must always understand their risk profile, financial goals, and the nature of different investment products before making investment decisions.