I use Zerodha platform, and currently own Zerodha’s top100case etf. It has an expense ratio of 0.26% whereas nippon 50 and next 50 have around 0.04%. But on Morningstar, zerodha’s etf is rated gold, whereas nippon’s etfs are rate bronze, despite containing the same stocks with same weightage. So what am I missing here? why is Zerodha’s etf more superior despite having higher expense?
I plan to buy more of large,mid and small cap etfs. Which would you say are the best according to your opinion. Also what % do you personally invest in each cap (like 60-30-10)? (or do you prefer mutual funds, if so which ones?)
I think you are not comparing like to like. Zerodha Top 100 ETF is different from Nippon 50 and Nippon next 50. I am only going by the name you have mentioned.
Zerodha TOP100CASE - Index Tracks the Nifty 100 Index whereas Nifty 50 Tracks the Nifty 50 Index. Hence expense ratio is bound to differ
If I understand correctly,
Zerodha top100case: top 100 companies by market cap
Nippon 50: top 50 (1-50)
next 50: (51-100)
So instead of buying top100case, I can invest in nippon 50 and next 50 separately, which have lower expense ratio, and still own the same stocks with same weightage. I don’t know why morningstar would rate them differently.
Got it. Yes. Just check the weightage of stocks in the three etf and if you are ok, then this strategy is good. Just going by the Top 100, the weightage of individual stocks will be very small. The benefit is it is too diversified so maket downturn may not affect this as much.
Do note that Nifty Next 50 is highly volatile and kind off behaves like a stock. Do study this aspect as well.
I personally have SBI nifty 50 and SBI nifty next 50. Also think of equal weight nifty 50. SBI has this etf.
Nippon Nifty 50 + Next 50 combination is slightly better in terms of returns compared to Zerodha TOP100CASE. However, Zerodha TOP100CASE offers more simplicity since you only need to invest in a single ETF instead of managing two. I personally invest in the Nippon Nifty 50 + Nippon Next 50.
I just did a check on the weightage of zerodha top 100. As per chat gpt, nearly 75 stocks have weightage below 1% of which 50 stocks are below 0.50%. This is overdiversification (according to me).
I repeat, I have nifty next 50. This just moves up and down like a pendulum.
Over the last 5 years, Nifty Next 50 and Nifty 500 ETFs have generated the highest returns. Although Nifty Next 50 comes with higher volatility, it offers strong potential for long-term growth.
Also, note that the gold/silver/bronze ratings i.e. Medalist ratings are a forward-looking prediction, less to do with backward-looking historical performance which is denoted by the Morningstar’s other “1-5 star ratings”.
The Morningstar Medalist Rating is a forward-looking system that aims to predict funds’ performance versus a relevant benchmark index or peer group. It takes the form of Gold, Silver, Bronze, Neutral, and Negative, with higher ratings denoting our conviction in a fund’s ability to outperform and lower ratings indicating a lack of conviction.
For passive strategies, Morningstar assigns Gold, Silver, and Bronze ratings to vehicles expected to deliver alpha that exceeds the lesser of the category median net alpha, or zero, over the long term. (Morningstar defines “long term” as periods of at least five years.)