Nifty 50 is an index measuring the performance of the National Stock Exchange (NSE) and it contains the top 50 companies of the exchange. From April 03, 2020, when the index was hit with a massive bear, it has risen more than 114%, as of January 10, 2022. That means, if you had invested money in these companies’ stocks, your money would have doubled by now. But investing in all these companies’ stocks is a time-consuming and expensive affair. Instead, what if you can invest in the index itself? Let’s take a look.
Nifty 50 index funds
A Nifty 50 index fund is a fund that tracks the Nifty index. It doesn’t try to outperform the index but rather replicate the growth of the index as it is. The fund is passively managed, and the portfolio has all the stocks from the Nifty 50 index. Every time Nifty 50 changes its composition, the index fund changes its portfolio accordingly as well.
Nifty 50 index funds can help you enjoy the growth of the overall stock market as Nifty 50 is a benchmark index and the economic condition is often directly reflected in its performance. If you are thinking about investing in a Nifty 50 index fund, the below pointers will help you with your decision.
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1. Affordable access to the top stocks
Since the Nifty 50 index is made up of the best-performing stocks, chances are the top stocks to buy today will be in the index more often than not. Buying one stock of each of these
companies will cost you a lot more compared to buying one stock of a Nifty 50 index fund, which has all these stocks included. As far as growth is considered, investing in a Nifty 50 index fund could give your money the same growth as investing in each individual stock of these companies as the fund is trying to replicate the performance of the index. Hence investing in Nifty 50 index funds serves as a more affordable option to get your hands on some of the top-performing and sought-after stocks in the stock market today.
2. Substantial long-term return
Investing in a Nifty 50 index fund is mostly a long-term affair. Markets can have short-term ups and downs, but the long-term growth of the index tends to offset these slight movements.
For instance, if you invest in a Nifty 50 index fund and plan to withdraw it in a month, there could be volatility and you could end up losing some of your money. But if you decide to keep your investment for a longer term, this loss can be offset by the overall growth in the long term, and you could pocket a profit.
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A diverse portfolio is something every investor aims for. This is because diversification can help you safeguard your money during tough economic periods. A Nifty 50 index fund gives you this diversification as the index constitutes stocks of different and diverse companies.
4. Lower expense ratio
Not only do Nifty 50 index funds have all the top stocks to invest in, but they also come with a lower expense ratio as they are passively managed. This ensures that the fees don’t offset your earnings in any significant way.
Nifty 50 index funds are a proven investment vehicle and could work wonders for you if they match your investment goals and risk appetite. Find out your investment horizon and invest in a Nifty 50 index fund soon!