Investing in Index Funds

[ayush123]

Hi all, I’m new to investing and see term “investing in index funds” a lot. What does this actually mean?
Is it buying an ETF that tries to track NIFTY50 or do I actively go and buy the stocks that comprise the NIFTY50?

PS: My goal is to match returns of NIFTY50 in the long run (20+ years)

[Arockiya_Raja]

@ayush123

Is it buying an ETF that tries to track NIFTY50 or do I actively go and buy the stocks that comprise the NIFTY50?

If you want to mirror the performance of the nifty 50, you can simply invest in a nifty 50 index fund. For more information on index funds, you can read this. You can find ETFs listed on NSE here. You can find index funds on our mutual funds platform coin as well.

Nifty ETF

List of all Indian Exchange Traded Funds (ETFs)

A couple of users had asked if there was a list of all ETFs that trade on the exchanges. Here’s the full list of symbols and the underlying benchmark index. All ETFs can be bought and sold on Kite. To buy an ETF, just search for the symbol>add to your marketwatch and place an order. If you wish to invest systematically (SIP) in ETFs, you can now set up SIPs on Kite. Note: Most of the ETFs are illiquid and don’t trade much. Check the market depth to check the volumes and always use a limit or…

[Aditya11]

Hey @ayush123, it really seems you are very new to the market,

So first of all, investing in all the constituents of an index and then tracking change and then rebalancing them all by ourselves would be a very complex problem for any retail investor with the small amount of money we have.

Thats why index funds and ETFs are there. The very basic difference between both is that index funds act like mutual funds and you can buy them on nav but ETFs trade like stocks on NSE and BSE.

So, if your goal is to match the returns of NIFTY50 in the very long term, better go with index funds and not ETFs for the simple reason of impact cost, tracking error and liquidity.

There are a lot of Nifty-50 Index funds such as: Navi Nifty 50 index fund or HDFC Nifty 50 index fund

Recently Zerodha also Launched an index fund: Zerodha Nifty LargeMidcap 250 Index Fund → This includes Nifty 100 and Nifty Midcap 150 (both 50-50)

[3D1]

Investment in nifty ETF makes sense if you want to create margin for trading as well as to get capital growth same as nifty index. It’s a low cost(expense ratio) option than index fund.

[Som_E]

Hi

I want to expirement with taking a nifty covered call and hedge it with Nifty ETF or Index fund

My question-
Price of niftybees today is 244.96
change - +1.17 (0.48%)

Price of nifty today 22,123.65
Change +118.95 (+0.54%)

The % gain varies by 0.05 (Is this actual or EOD settlement related discrepancy?)

Now what quantity of Niftybees do I need to buy to mirror gain of ONE FUT Lot of nifty?

[Som_E]

@Som_E

rice of nifty today 22,123.65
Change +118.95 (+0.54%)

Alternately, would it make sense to buy equivalent stocks directly in cash worth 11L (50 * 22194) to mirror 1 fut lot of nifty?

[Arockiya_Raja]

@Som_E

The % gain varies by 0.05 (Is this actual or EOD settlement related discrepancy?)

ETF’s price might not exactly track its net asset value (NAV) due to supply and demand factors in the market for the ETF itself. ETFs, like individual stocks, are traded on exchanges, and their prices are determined by supply and demand for the ETF shares. ETF is generally closely linked to its NAV (which should reflect the value of the underlying index), there can be short-term discrepancies. For instance, if there are more buyers than sellers of the ETF, the price might be pushed above the NAV, and vice versa.

@Som_E

Alternately, would it make sense to buy equivalent stocks directly in cash worth 11L (50 * 22194) to mirror 1 fut lot of nifty?

Calculate the number of stocks to buy from contributors. You will find the answer.