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00:00Welcome, you are watching the Mutual Fund Show.
00:10I am Tamannaah Inamdar.
00:11This is your one-stop destination for all things mutual funds and your investments.
00:16Now today we are talking about the NIFTY 500 Index Fund.
00:22If you want to bet on the Indian equity market as a whole, you can go no further than the
00:29NIFTY 500 Index Fund.
00:31It's a fund which mirrors the NIFTY 500, which is an index which has the top 500 companies
00:39on the NIFTY.
00:40So the most comprehensive market index in India undoubtedly.
00:45So it covers 500 of the top companies across large, mid and small cap.
00:49They offer a broad diversification and exposure to nearly 92% of the market cap of the NSE.
00:59There's been a recent launch also of an NFO on the NIFTY 500 Index Fund.
01:04So there are a lot of products out there as well.
01:07The question we're going to be tackling today is, is this the right choice for your portfolio?
01:12If you're looking for an index fund, don't restrict yourself to the top 50 stocks on
01:17the NIFTY and don't want too much of a downside risk either.
01:23Are the potential returns worth the risk?
01:26To talk on this, I'm joined today by Pankaj Matpal, Founder and CEO of Optima Money Managers
01:31and Ren Agarwal, Financial Educator and Founder at FinSafe India.
01:35Welcome to both of you and thank you so much for joining us.
01:38Great to speak with you as always on the show.
01:40Pankaj, let me begin with you in terms of returns.
01:43What are the kind of returns that such index funds, ones that essentially mirror the NIFTY
01:48500, what are the kind of returns they give?
01:52Good afternoon.
01:54See NIFTY 500, because it represents 500 companies listed in the equity market in an NSE.
02:02So you are investing in large cap, mid cap, small cap.
02:05If you see long term, you can expect around 15% CAGR from this kind of index.
02:13But one has to understand because your investment is across the market segment, across large
02:18cap, mid cap and small cap.
02:20So your investment horizon should be longer.
02:25In fact, you know what, let's let's look at the one year returns of some of these top
02:29funds before we move ahead and just put into perspective exactly what we're talking about
02:34when we talk about the NIFTY 500 funds.
02:36So this is the average one year return and three year returns because some of these funds
02:41have not been around for three years.
02:43These are the top ones.
02:44So the MOSL NIFTY 500 over a year has given 35% returns.
02:51In three years, it's a bit more tempered, 16.5%, nearly 17%.
02:56The ICICI BSE 500 ETF has given a 36% return on average and 18% return in the last three
03:05years.
03:06The HDFC BSE 500 ETF has given a 36% return.
03:10Obviously, they're all mirroring the index.
03:12So the one year return is pretty much the same.
03:15So an average of 36% is what you are getting and it mirrors what happens out there.
03:21Now, Mrin, if you look at it, it's not it's a pretty decent return since it's a passive
03:26fund, lower costs.
03:29Is this a good choice for someone who is looking to put in money and doesn't want to think
03:33about it too much?
03:36So good afternoon, Tamanna and lovely to be here on the show as always.
03:41Well, I would say that the choice of investing in this fund really depends upon what is your
03:47existing portfolio, because when you look at the NSE 500 index, the top 50 stocks, which
03:54is the NIFTY 50 stocks, have a 60% weightage in this particular index.
04:00And if you look at the NIFTY 100 stocks, they actually have a 73% weightage.
04:06So in effect, this fund, this index is quite top heavy and large cap oriented.
04:12And if you see the balance, 400 stocks are from the mid cap and the small cap space,
04:18and that is around 27%.
04:21So while it does give you access to the broader markets, we must remember that given the fact
04:27that the index is constructed based on free float market capitalization, it does tend
04:37to have a very high exposure to large cap stocks.
04:42And so in effect, what I would say is that if you already are having NIFTY 50 index fund
04:50in the portfolio, and you're going to add this on, there would be a very high overlap
04:57on the stocks that you're actually holding between these funds.
05:00So in those cases, I wouldn't actually recommend it for someone who's new into the market who
05:05wants to take exposure to the broader markets, they could look at it.
05:09Okay.
05:10So what kind of, let me come to you on that question, Pankaj.
05:14What kind of an investor should be looking at these funds?
05:18And there's a new NFO on the block also.
05:21Is there an option one should be looking at?
05:23See, Tamanna, first thing, as you mentioned, as you showed the graphics, like in last one
05:30year, NIFTY 500 delivered around 34%, 35% returns, but investors should not go with
05:38the one year return.
05:39See, when you are expecting long term, or when you're investing for long term, that
05:4315% around CAGR, what I mentioned, is the right expectation.
05:48Second thing, who should invest?
05:50See, if you want to invest in multi-cap funds, then this is a good choice because it covers
05:56large cap, mid cap, small cap, everything.
05:59So that is why if your objective is to invest in multi-cap fund, where you want to have
06:04allocation across the market segment, across the sectors, then it is a good choice.
06:09But if you want to invest for a shorter term for a large cap bet you want to take, then
06:14I think that NIFTY 50 or NIFTY 100 fund can be a better choice.
06:19So investors who have investment horizon for more than seven years, want to take the
06:25exposure across the market segment, who have moderate to high risk appetite, they should
06:31consider investing in NIFTY 500 index fund.
06:35Okay, so moderate risk appetite is what you need to do.
06:40Now among these, Marin, and that's where the question gets a little tougher, among the
06:44current options, if someone is looking for this kind of a fund, which one do you prefer?
06:49Does it not matter?
06:50Because at the end of the day, they're just mirroring the index performance.
06:53But having said that, what is a fund that you would recommend someone to take up if
06:57they're looking for such a broad market exposure and what proportion of your entire investment
07:05should go into a fund like this?
07:07So Tamanna, I would again reiterate that, you know, if you're already holding a NIFTY
07:1450 index fund, by investing into this fund, you're really not getting further diversification.
07:20Also, when you look at the rolling returns, which are a better way to look at returns
07:25as well, more realistically, if you look at the rolling returns, there is not much difference
07:30in the rolling returns between the NIFTY 50 TRI and the NIFTY 500 TRI as well, right.
07:38So again, what I would say is that if you're already holding a NIFTY 50 index fund, I wouldn't
07:43actually recommend a further investment into the NIFTY 500.
07:47I would rather say that if you really want the diversification, then go in for NIFTY
07:52mid cap 150 or maybe a NIFTY small cap 250 index that would give you better diversification.
07:59Now, if you are not holding a NIFTY 50 index fund, then and you want to look at a broad
08:05based fund, I would always look at an existing fund which has track record, whose tracking
08:11error is also known.
08:13So I would say then look at the Motilal Oswal fund.
08:16Okay.
08:17So Motilal Oswal fund is a choice.
08:19Pankaj, I'm going to come to you on that question as well.
08:22Which fund of all relatively better and percentage of allocation or you would say avoid completely?
08:30No, no, I would not suggest anybody to avoid it.
08:33One can definitely invest in NIFTY 500 fund because if the objective is to create wealth
08:38in long term and you want to, for example, you want to start SIP where you have only
08:44one or two funds in your portfolio.
08:47So this kind of fund can be a good choice.
08:49Yes.
08:50As far as name is concerned, Motilal Oswal NIFTY 500 is a good choice because of low
08:55tracking error, low expense ratio and with a performance history.
09:00But as a segment, as a category, I will not rule out that one should not invest in NIFTY
09:07500.
09:08In your portfolio, definitely you want a diversification and you have a choice.
09:13Either you invest in one large cap, one mid cap, one small cap or through one fund, you
09:18can get exposure across the market segment.
09:21Yeah.
09:22Okay.
09:23So that is the upside of it.
09:27Through one fund, you can get the entire market exposure as well and returns are not
09:33half bad.
09:34You don't have to think about it too much.
09:35On the downside, maybe, you know, you restrict your options as well.
09:38All right.
09:39Let's come to some of your queries.
09:40Manish Prajapati writes in to us.
09:42Remember, if you want to get our experts to answer your questions, those numbers on your
09:47screen.
09:48Manish Prajapati is age 37, says he is looking to invest one crore rupees with a 15 year
09:53time horizon.
09:54Says my goal is to reach five crores.
09:57I'm looking at an SIP of one lakh per month and to do a lump sum when the opportunity
10:04comes.
10:05I'm willing to take a moderate risk.
10:06What are your suggestions?
10:07Well, interesting, interesting question there because the number is not insignificant.
10:14One crore rupees, 15 year time horizon and in 15 years, he wants one crore to go to five
10:19crores.
10:20So, Pankaj, let me start with you and with that basic question.
10:23The time horizon and the ambition, are they matching?
10:27Exactly.
10:28Even I calculate at a CAGR of 12 percent, one crore rupees invested today will grow
10:34to around 4.78 in 15 years.
10:38So close to his target, what he is expecting.
10:42Okay.
10:43So that is quite.
10:44So not an unrealistic target.
10:46Target is fair.
10:47He might even exceed it.
10:49Exactly.
10:50And he says that he will invest one lakh rupees per month along with that.
10:54So he can expect around 10 crore rupees in 15 years with this investment.
10:59So the target is quite reasonable.
11:03And if I recommend some schemes of 15 years, he can consider like Kotak multi-cap fund,
11:09ICICI potential, multi-asset fund, Bajaj, Finster, Flexi cap fund and Motilal Oswal large
11:15and mid-cap fund.
11:16So all diversified funds for 15 years time horizon.
11:21Okay.
11:22Okay.
11:23So those are some of those picks that you have.
11:25And you know, the second part of it, Mirinda, I'm going to come to you on the second part
11:28of it.
11:29And of course, you can address the basic question as well.
11:31He says, I'm looking to invest a lump sum when the opportunity comes.
11:36Now here is where the devil lies in the details.
11:39Because how do you know the opportunity has come?
11:41I think that's the million dollar question, isn't it?
11:44Absolutely.
11:45Absolutely.
11:46You know, and I think it's, I think this is what happens when you have a bull market for
11:50four years, that overconfidence creeps in and we feel that, you know, that we can spot
11:56these opportunities.
11:57Honestly, it's very difficult.
11:58And I would just say that, set up a SIP, right.
12:04And of course, keep some money aside if you feel and you know, as in when if you feel
12:08when there is a correction and you feel it's a good time, you can look at putting in some
12:12money.
12:13But I would say that for a majority of the money, set up the SIP and just get going with
12:18that.
12:19Okay.
12:20So keep it as an SIP.
12:21That is safer, definitely.
12:22Pankaj, I'm going to ask you that question, because I know you face it many times.
12:25When is the right time?
12:26You know, and before and after every big event, I mean, we have a big event coming up in terms
12:31of the Fed rate cut.
12:33It's likely to start off a cycle of rate cuts.
12:36Everyone's going to be wondering what to do next.
12:38Is this the right time is a question you will ask?
12:40How do you know?
12:41And especially for this, we was written in who says they are willing to take moderate
12:46risks.
12:47It's very difficult to time the market and that is why SIP helps in averaging out your
12:54cost.
12:55That is a better choice.
12:56But yes, as you mentioned, sometimes when we feel that because of some event, for example,
13:01before election, like we were expecting that time that if the result will be what kind
13:07of result we are expecting and what would be the impact of that.
13:12So if that kind of some events are expected, something or like Fed rate cut right now,
13:18based on that, you can definitely increase or decrease your exposure, but otherwise very
13:23difficult to time the market.
13:25My suggestion for retail investors that they should invest in staggered manner, SIP, STP
13:31is a good choice for that.
13:32Okay, SIP and STP is a good choice, better to have it in a staggered manner, especially
13:37since your investment amount and your timeline is not unrealistic.
13:43So you don't have to do anything out of the box, stick to the straight and simple and
13:46you will get there.
13:47Sandeep is joining in age 58 says, which is the best balanced advantage fund to invest
13:53in for the next five years?
13:55Sandeep, thank you so much for writing into the question.
13:57Mrin, I'll start with you.
13:58Why don't you start by giving our viewers a sense of why a balanced advantage fund,
14:04what is a balanced advantage fund and what are the pros and cons?
14:09Balanced advantage funds are investments where, are funds where they invest both in stocks
14:15and in bonds.
14:16So they have both equities and debt in the portfolio.
14:19Now the percentage allocation between stocks and bonds is going to differ based on an internal
14:26metrics created by the fund house.
14:29So it could be on PE ratio, it could be any quantitative metrics that has been developed
14:35by the fund house.
14:36So based on that, they vary the allocation between equity and debt.
14:41So the good thing is that what happens with balanced advantage fund is that they do the
14:48rebalancing for you within the fund and it is not something that you have to do.
14:52So like for example, you have the ICICI balanced advantage fund, wherein when the markets are
14:58at a high, then they will automatically reduce the allocation to equity and move into debt
15:03and vice versa.
15:04And of course, this is done at regular intervals.
15:07You also have other funds which, you know, for example, might follow a momentum strategy
15:12like for example, Edelweiss.
15:14So each fund in the category actually has a different set of quantitative parameters
15:19based on which they do the rebalancing.
15:22But net net for the investor, it's a great investment because in this one fund, you can
15:28get your asset allocation done in debt and equity and the rebalancing is also happening
15:34automatically.
15:35So from a moderate investment perspective, this is highly recommended.
15:40And again, you choose the fund based on the sort of risk that you would want to take.
15:45My recommendation would be the ICICI balanced advantage fund.
15:49So ICICI balanced advantage fund is something you could look at for the next five years.
15:54Pankaj, I'll take that question to you.
15:57Five year timeline is good enough for a balanced advantage fund?
16:01A hybrid fund which invests in equity and debt both.
16:05So five year investment horizon is a good time to invest in.
16:08But one thing I would like to mention here, see, balanced advantage funds are basically
16:14dynamic asset allocation fund which invest in equity and debt based on the market that
16:19allocation is changed by the fund managers.
16:22But some funds are like pro cyclical, some are counter cyclical.
16:26That is why all the balanced advantage funds are not following the same model.
16:33So if you want a scheme where you want that aggressive allocation in equity, then Edelweiss
16:39balanced advantage fund or HDFC balanced advantage fund can be a choice.
16:43But otherwise, if you want more downside to be protected, then ICICI prudential balanced
16:49advantage fund can be a better choice.
16:51OK, let's go on to the question.
16:55Rahul has sent us age 37.
16:57He is looking to invest 20 lakh with a seven year time horizon, needs lump sum investment
17:02advice.
17:03So let's start with the basics.
17:04First of all, if you are looking to invest 20 lakhs with a seven year time horizon, Pankaj
17:09Matpal, I'll come to you.
17:10Should this investment be done in a lump sum?
17:14Yeah, exactly see, when you say lump sum does not mean that in a single day you have to
17:20invest the whole amount.
17:21You can divide it in four or five parts or maybe that six installments.
17:25So you do STP of six weeks, something like this one can invest.
17:30But I would not suggest that somebody invest that money in six months or longer period
17:37when the money is already available, because sometimes that you keep buying at the higher
17:42rate.
17:43So either you divide in four parts, five parts and invest on your own, or you start STP of
17:50a weekly STP of six weeks, something like that, so that in one and a half month you
17:55invest that total money.
17:57So that is a suggestion from my side.
17:59What are the kind of funds he should put this in?
18:02So first you are saying not lump sum and then you're saying look at STP etc.
18:08So over seven years, what is the kind of breakup that should be done for a 20 lakh amount?
18:13Yeah, see, seven years is a good time period as such, means he can take some risk.
18:20And in this case, I'll suggest that a scheme like Flexicap, Bajaj Finster Flexicap Fund
18:25can be one choice or Motilal Oswal Large and Mid Cap Fund.
18:28So not a pure small cap fund, I would recommend to him, but some diversified funds which invest
18:36majorly in large cap and mid cap, that kind of funds can be considered.
18:39Okay, let me come to you Mrin with that question.
18:43Suppose there is a requirement to do a lump sum investment for whatever reason, what should
18:48that breakup look like and if there's a choice, go for an STP or an SIP?
18:54I agree with Pankaj that he should consider doing an STP and not wait too long to deploy the funds.
19:03Also in terms of the fund choices, I would go in for more conservative funds over mid
19:07cap and small cap funds.
19:10And I would suggest Nifty 50 Index Fund like ICICI or UTI and he can also consider some
19:19Flexicap funds like Parag Pare Flexicap Fund and HDFC Flexicap Fund.
19:25Okay, so Flexicap Fund seems to be the choice that both our advisors are talking about.
19:32Let's look at the question coming in from Natarajan Ramanathan, age 55, says I'm looking
19:36to invest 10,000 rupees a month for over seven years.
19:39I can't choose between the UTI Nifty 50 Index Fund and the ICICI Pro Nifty 50 Index Fund.
19:47Which one should I go for?
19:49First of all, let's start with the basics.
19:51Our viewer for age 55, Mrin, I'll come to you first, says that they want to invest 10,000
19:57rupees a month for the next seven years.
20:00Is an index fund and a Nifty 50 Index Fund the best choice?
20:05Let's start with that first and then come to which one.
20:08I think it's a good choice, especially given his age.
20:11I think it's a good choice.
20:14And you know, Tamanna, for a lot of investors, it becomes very difficult to figure out which
20:19fund to invest into.
20:20So by investing in a Nifty 50 Index Fund, you're really participating in the India story
20:25and in that sense, I think it's a good fund.
20:28Now between both the funds, honestly, again, when one looks at the rolling returns, there
20:32is not that much of difference in the returns.
20:36Of course, UTI does have a slightly lower tracking error.
20:40I think it was 0.04 in the last one year versus the ICICI having 0.06.
20:46So you could go in for either of them because tracking error at the end of the day is the
20:50main thing to look at in the index fund.
20:53That said, UTI is lower in tracking error.
20:57But if you look at the returns, they're pretty similar.
21:00So he can make his choice based on this.
21:02OK, so, you know, Pankaj, does it really matter if it's an index fund after all?
21:07It's not like the fund manager has to do much.
21:10See, there's a difference between tracking error and expense ratio because of expense
21:15ratio and some more things that tracking error is different between different funds.
21:21So here, as Mrinal explained just now, so difference is not much.
21:26If you see last one year, even the tracking error is not much, I mean, there is not much
21:30difference between two funds.
21:32He can choose any one of them.
21:35OK.
21:36In your view, Pankaj, is an index fund, a Nifty 50 index fund a better idea?
21:42And let me hark back to a question, which is the topic of the show today.
21:45If I have to choose between a Nifty 50 index fund and an NSE500 index fund, which one would
21:51be preferable?
21:52See, it depends that your risk appetite, your objective investment, your investment horizon,
21:58especially for this viewer, Natarajan, because he had mentioned that his investment horizon
22:05is seven years, his age is 55 years.
22:08So considering this information, my suggestion would be that Nifty 50 will be a good choice.
22:15But if a young investor wants to invest for longer duration, in that case, even mid cap,
22:20small cap, or if somebody wants to invest in a multi cap, then Nifty 500 can be a better
22:25choice.
22:26So it's not that each fund will be for every investor.
22:31One has to see that what is the objective and how much risk one can take.
22:36As I mentioned, for Natarajan, this is a good choice.
22:39Otherwise, Nifty 500 can also be considered.
22:42And beyond that, there are many factor investing fund, smart beta fund, those make better choice
22:48for many investors.
22:50OK.
22:51Jose writes in to us, age 53, says, I want to invest 70 lakh rupees on a flexi cap fund.
22:59Which one should I go for?
23:00Great question, Jose.
23:01And thank you so much for writing in to us.
23:03So Pankaj here, they've not mentioned whether they want to go lump sum or, you know, STP
23:10or SIP.
23:11But assuming the age, you probably not do too long of an SIP or an STP and the amount
23:17is also significant.
23:18First of all, if there are 70 lakhs to invest, should it be in one go and how much of it
23:23should then go in a flexi cap fund?
23:27Again, because information is not complete here, if the investment horizon is something
23:33like seven years or more than that, then flexi cap fund can be considered along with some
23:38multi asset allocation fund.
23:40But flexi cap is a good choice because it gives you opportunity to invest across the
23:45market segments.
23:46At the same time, fund managers have flexibility to decide that where they want to have major
23:52allocation of the total asset.
23:54So Nippon India flexi cap fund, Bajaj Finster flexi cap fund or ICICI Prudential flexi cap
24:00fund.
24:01These kind of flexi cap funds can be considered.
24:04And if I want to add something more to this, like as I mentioned, multi asset allocation.
24:09So ICICI Prudential multi asset allocation fund is a good choice, which gives you a choice
24:15to invest across the asset classes like equity, debt, gold, etc.
24:23And which is the best flexi cap fund in your view?
24:27Yeah, like Nippon India flexi cap fund or Bajaj Finster flexi cap fund, ICICI Prudential
24:33flexi cap fund, these can be considered.
24:35Mrin, what about the flexi cap funds of your choice?
24:39Because that's essentially his question.
24:41Which one should I go for in terms of a flexi cap fund?
24:44Well, I like Parag Parekh flexi cap.
24:48I think, you know, the international exposure is an added advantage in that fund.
24:52And I like the HDFC flexi cap, good fund for long term holding, has worked out over long
24:58periods of time.
24:59So these are my two choices.
25:01Okay, so Sheel is joining us and I think I'll just be able to squeeze in one more question.
25:06He's 24, started investing 4000 rupees each in the Parag Parekh flexi cap fund, something
25:11Mrin just mentioned, and the HDFC Nifty 50 index fund this month.
25:16He's also planning to invest in mid and small cap funds.
25:19He's seeking some recommendations, yes, Mrin?
25:22So if you're looking at mid and small cap funds, I like Mirai mid cap, and I like SBI
25:29or Nippon small cap, he could look at either of these.
25:33And actually, I would say that if his horizon is long term, then look at the small cap funds
25:38because the actively managed small cap funds, there are quite a few funds, which have
25:42consistently beaten the benchmarks very well.
25:46So I would actually suggest more on the small cap side, considering that he already had
25:50the Nifty 50 index fund and the Parag Parekh flexi cap fund.
25:56All right, thank you so much, Mrin and Pankaj for joining us today and for all our viewers
26:01also who have tuned in and sent us your questions.
26:04In fact, if you want to write in to us, the number is on your screen.
26:07We're happy to take your questions and have our experts answer it.
26:10But for now, that's all the time we have on the show.
26:12Stay tuned for a lot more to NDTV Profit.