Nifty Bees-exchange Traded Fund-vrk100-making Risk-less Profits From It-30092009
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NIFTY BeES (Nifty Benchmark Exchange Traded Scheme) is a mutual fund product, but it is traded on NSE like any company’s share. It is an open-ended mutual fund scheme. Like a share, one can buy/sell units of Nifty BeES on NSE (National Stock Exchange) throughout the trading hours. NIFTY BeES is traded in demat form only. One can buy NIFTY BeES from NSE through one’s broker and the units will be credited to one’s demat account on normal T+2 basis. If one desires, one can sell the units again through NSE anytime during the trading hours.
Rama Krishna Vadlamudi
[email protected]
MUMBAI September 30th, 2009 FOR REGULAR UPDATES ON THE AUTHOR'S DOCUMENTS: JUST CLICK
www.pdfcoke.com/vrk100
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 1 of 8
EXCHANGE-TRADED FUND (ETF):
An ETF is basically an index mutual fund scheme with a little difference
The main difference between an index fund and an ETF is this: an ETF is always listed and traded on an exchange; whereas an index fund has to be bought/sold directly with the particular Mutual Fund company or through a mutual fund agent/distributor
An ETF is linked to a benchmark index like any index fund
An ETF can be bought and sold through an exchange like any share
To buy an ETF, one requires a demat account and a trading account with a broker to buy/sell on the particular exchange where the ETF is listed/traded; whereas for buying an index fund, investor does not require a demat account and she can directly approach the mutual fund for buying or selling the index fund units
SALIENT FEATURES OF NIFTY BeES: One unit of NIFTY BeES is equal to one-tenth of the value of S&P CNX Nifty Index. On 29.09.09, Nifty 50 index has closed at 5,007; whereas, NIFTY BeES was quoting at Rs 498 on day’s closing. The small difference (technically called tracking error) between the underlying Nifty index and NIFTY BeES is due to the supply and demand factors of NIFTY BeES on NSE. On 29.09.09, its day’s high was Rs 500 and day’s low was Rs 495. During the trading hours, the price of NIFTY BeES will fluctuate in tune with the movement of Nifty 50 index. If the NIFTY Index goes up to 6,000 in the next six months, the value of one unit of NIFTY BeES will go up to Rs 600 or if the Nifty Index retraces to 4,500, then the value of one unit of NIFTY BeES will be readjusted to Rs 450 in tune with the movement of the general market The structure of Nifty BeES is such that it does not hurt long-term investors from the inflow and outflow of short-term investors. This is because the Fund does not bear extra transaction cost when buying / selling due to frequent subscriptions and redemptions. It is traded only on the NSE (face value Rs 10) & it is India’s first ETF It is managed by the AMC of Benchmark Mutual Fund, which is sponsored by one Niche Financial Services Pvt. Ltd. The fund manager is Vishal Jain. This Mutual Fund maintains other ETFs also – like, Gold, Bank, Derivatives and others. The total average assets under management by the Benchmark MF are Rs 1,213 crore as on 31st of August, 2009. Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 2 of 8
Entry Load is NIL Exit Load: With effect from August 01, 2009, Exit load (technically referred as CDSC) (if any) of up to 1% of the redemption value charged to the unit holder on redemption of units shall be retained by each of the Schemes in a separate account and will be utilized for payment of commissions to mutual fund advisors and to meet other marketing and selling expenses It is open-ended mutual fund For tax purposes, it’s considered as an equity-oriented mutual fund. Longterm capital gains tax (for holdings of more than one year) is NIL. Short-term capital gains tax (for holdings of less than one year) is 15 per cent, plus surcharge (if any) and 3% education cess STT is applicable for buying and selling of units of NIFTY BeES on NSE As NIFTY BeES is bought from NSE like any share, brokerage needs to be paid by the investor for buy/sell transactions Dividend distributed by AMC for NIFTY BeES is exempted from Dividend Distribution Tax (DDT). Dividend is not taxable in the hands of individual resident Indian tax payers. Benchmark AMC declares dividends on NIFTY BeES, now and then. The latest dividend was Rs 4.50 per unit of NIFTY BeES paid with record date of 15.07.09. Previously dividends were Rs 5.00 (12.09.08) and Rs 8.00 (05.01.07). NSE symbol: NIFTY BEES NIFTY is calculated using the Free Float methodology Fifty stocks that are part of NIFTY Index are selected based on high degree of liquidity Assets under management as on 31.08.2009 for NIFTY BeES: Rs 214 crore. As on September 29th, 2009; a total of 47.37 lakh units of NIFTY BeES are issued to investors. It is highly liquid from an individual investor’s point of view NIFTY BeES is a passively managed fund. NIFTY BeES’s underlying will be in proportion to the weight of the constituents of Nifty 50 index.
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 3 of 8
Total expense ratio of NIFTY BeES is 0.50%, which is one of the lowest in the universe of index funds managed by all mutual funds in India Tracking error of NIFTY BeES is 0.26% annualized. It is the lowest among all index funds. Tracking error is the difference between NIFTY BeES and its benchmark index, that is, S&P CNX Nifty. The tracking error occurs due to some factors, like: a small component of cash in the fund, difference in weights between the fund and the underlying index, etc. The tracking error of 0.26% is negligible from individual investor’s point of view. Trading of NIFTY BeES has been going on since its inception on NSE on 28.12.2001 All types of investors – whether retail or institutional – can invest NIFTY BeES has been consistently outperforming (to an extent of one to two per cent) its benchmark Nifty 50 index for several years
NIFTY BeES PERFORMANCE (as on Sep. 29th, 2009):
% RETURN
3-month
1-year
2-year
3-year
5-year
Since inception
NIFTY BeES
13.15
29.54
-0.01
12.29
24.61
22.84
Benchmark*
14.03
30.05
-0.14
11.74
23.71
-- NA --
Source: ValueResearch * Benchmark is S&P CNX NIFTY INDEX Returns upto 1-year are absolute & above 1-year compounded annual growth rate-CAGR
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 4 of 8
CHART SHOWING ONE-YEAR RETURN FROM NIFTY BeES: NIFTY BeES 1-YR RETURNS 600 500 Rs
400 300 200 100 9/29/2009
8/29/2009
7/29/2009
6/29/2009
5/29/2009
4/29/2009
3/29/2009
2/28/2009
1/29/2009
12/29/2008
11/29/2008
10/29/2008
9/29/2008
0
Source: NSE. Data as on September 29, 2009.One-year price chart.
In just 11 months, it jumped by 100%! You may not believe it, but it’s true.
CHART SHOWING ONE-YEAR VOLUMES FROM NIFTY BeES (on NSE):
9/29/2009
8/29/2009
7/29/2009
6/29/2009
5/29/2009
4/29/2009
3/29/2009
2/28/2009
1/29/2009
12/29/2008
11/29/2008
10/29/2008
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 9/29/2008
Rs lakh
NIFTY BeES 1-YR VOLUMES
Source: NSE. Data as on September 29, 2009
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 5 of 8
WHAT IS THE REPRSENTATION OF NIFTY BeES’ TOP 10 HOLDINGS:
1 2 3 4 5 6 7 8 9 10
Nifty BeES – Top 10 Holdings
Company weight %
Reliance Industries Ltd
11.14
1
Infosys Technologies Ltd Larsen & Toubro Ltd ICICI Bank Ltd HDFC Ltd ITC Ltd Bharti Airtel Ltd HDFC Bank Ltd State Bank of India ONGC Ltd Total top 10 holdings
7.96 7.17 6.52 4.85 4.63 4.10 3.95 3.51 3.12 56.95
2 3 4 5 6 7 8 9 10
Data is as on Aug. 31,, 2009 Source: ValueResearch
Holdings worth Rs 5 lakh in NIFTY BeES will considered as holdings in the top 10 NIFTY Index components Reliance Industries Ltd
Market Value Rs lakh
0.56
Infosys Technologies Ltd Larsen & Toubro Ltd ICICI Bank Ltd HDFC Ltd ITC Ltd Bharti Airtel Ltd HDFC Bank Ltd State Bank of India ONGC Ltd Total top 10 holdings
0.40 0.36 0.33 0.24 0.23 0.21 0.20 0.18 0.16 2.85
Data is as on Aug. 31, 2009
The data on the right side of the above table gives an idea about the top holdings of an investor who is holding NIFTY BeES units worth Rs 5 lakhs on a given day, that is, August 31st, 2009. By buying units worth Rs 5 lakh, you’re indirectly holding Rs 0.56 lakh of RIL, Rs 0..40 lakh of Infosys, Rs 0.36 lakh of L&T and so on.
TOP FIVE SECTORAL HOLDINGS OF NIFTY BeES:
% holding
TOP FIVE SECTORS % 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
71.24
22.14
Energy
21.79
Financials
Source: ValueResearch
11.78
8.61
6.92
Technology
Diversified
Metals
Total top 5 sectors
Data as on Aug. 31, 2009
Note: Energy-RIL, ONGC, etc; Financials-ICICI Bk, HDFC, SBI, Axis Bk, etc; Technology-Infoysy, TCS, etc; Diversified-L&T, Grasim, etc; and Metals-Tata Steel, Sterlite Inds, Jindal S&P, etc
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 6 of 8
BUYING/SELLING NIFTY BeES DIRECTLY WITH THE BENCHMARK MUTUAL FUND: An investor can buy or sell minimum 10,000 units of Nifty BeES and in multiples thereof directly with the Benchmark Mutual Fund. This route is usually used by High Networth Individuals (HNIs) and institutions to buy this exchange-trade product. It is very convenient for corporates also. Minimum Lot Size
: 10,000 units
Price
: In exchange for a basket of Nifty securities and cash defined as “Creation Unit”
Eligibility
: Authorised participant or large institutions
For more on this ‘Creation Unit’, HNIs and institutions can visit: http://www.benchmarkfunds.com/creationUnit.pl?product=nb
THREE IMPORTANT RISKS: 1) MARKET RISK: The returns of this fund are linked to the movement of stock markets in India in general. If the overall market turns adverse, then the fund will give negative returns to investors 2) LIQUIDITY RISK: If sufficient volumes are not available on the exchange for the product, investors may not be able to buy new units/liquidate their holdings easily in the market and as such this investment involves liquidity risk (for small individual investors, this is not a problem at all) 3) TRACKING ERROR RISK: The fund may not be able to invest the entire corpus in the same proportion as in the underlying S&P CNX Nifty Index due to certain factors such as: expenses incurred by the fund, corporate actions, cash balances, dividend payouts, changes in the underlying index and regulatory policies.
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 7 of 8
MY OPINION & SUMMARY: NIFTY BeES is a low-risk financial product (low-risk compared to individual stocks). It provides reasonable returns with ‘below average’ risk. It is a very simple and easy to understand product. As the risk is lower, returns from NIFTY BeES will also be normal unlike shares which have the potential to be multibaggers. As the number of fund managers, mutual fund houses and number of schemes are increasing by leaps and bounds every day, it would be difficult for fund managers to outperform the indices (like, Nifty, Sensex, BSE-500) on a sustained basis in the long-term. (The author does not have any solid data to back his opinion.) Finding new stock ideas year after year is next to impossible in these times of greater higher volatility and abounding global uncertainties. As the NIFTY BeES represents the country’s top fifty companies on NSE through the Nifty 50 index, it would be very easy and convenient for individual investors to buy the stock market in its entirety without bothering much about the wild movements in the fortunes of individual company’s performance. However, one needs to keep in mind one’s overall asset allocation, individual’s need for liquidity and to have a broad outlook on market dynamics, prevailing sentiment, country’s economic situation, global factors, corporate performance, regulatory risks, political risks, etc. By investing through NIFTY BeES, individual investors will be relieved of the burden of poring over bulky annual reports, opaque financial statements, analyzing quarterly/periodical results minutely and scratching one’s head over declarations of bonus shares, dividends, rights issues, open offers, stock splits, etc. It is a good start with 15 or 25 per cent allocation for ETFs in one’s equity portfolio for individual investors who like passive investments. NIFTY BeES, as of now and according to the present available information, is much superior to other index funds* that are available to investors. (*These index funds can only be bought directly from mutual fund houses and not through stock exchanges; and these index funds have unreasonable tracking errors which may dilute the overall returns in the medium/long term)
PHILIP A. FISHER: "In the stock market, a good nervous system is more important than a good head." "What really counts in determining whether a stock is cheap or overpriced in not its ratio to the current year's earnings, but its ratio to the earnings a few year's ahead." P.S: For further information, please visit: www.nseindia.com, www.benchmarkfunds.com, www.valueresearchonline.com and www.vanguard.com. The above analysis is made keeping in mind the needs of individual investors. Mutual fund performance is subject to market risk and as such investors should do their own due diligence before start trading in NIFTY BeES.
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 8 of 8
Rama Krishna Vadlamudi
[email protected]
MUMBAI September 30th, 2009 FOR REGULAR UPDATES ON THE AUTHOR'S DOCUMENTS: JUST CLICK
www.pdfcoke.com/vrk100
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 1 of 8
EXCHANGE-TRADED FUND (ETF):
An ETF is basically an index mutual fund scheme with a little difference
The main difference between an index fund and an ETF is this: an ETF is always listed and traded on an exchange; whereas an index fund has to be bought/sold directly with the particular Mutual Fund company or through a mutual fund agent/distributor
An ETF is linked to a benchmark index like any index fund
An ETF can be bought and sold through an exchange like any share
To buy an ETF, one requires a demat account and a trading account with a broker to buy/sell on the particular exchange where the ETF is listed/traded; whereas for buying an index fund, investor does not require a demat account and she can directly approach the mutual fund for buying or selling the index fund units
SALIENT FEATURES OF NIFTY BeES: One unit of NIFTY BeES is equal to one-tenth of the value of S&P CNX Nifty Index. On 29.09.09, Nifty 50 index has closed at 5,007; whereas, NIFTY BeES was quoting at Rs 498 on day’s closing. The small difference (technically called tracking error) between the underlying Nifty index and NIFTY BeES is due to the supply and demand factors of NIFTY BeES on NSE. On 29.09.09, its day’s high was Rs 500 and day’s low was Rs 495. During the trading hours, the price of NIFTY BeES will fluctuate in tune with the movement of Nifty 50 index. If the NIFTY Index goes up to 6,000 in the next six months, the value of one unit of NIFTY BeES will go up to Rs 600 or if the Nifty Index retraces to 4,500, then the value of one unit of NIFTY BeES will be readjusted to Rs 450 in tune with the movement of the general market The structure of Nifty BeES is such that it does not hurt long-term investors from the inflow and outflow of short-term investors. This is because the Fund does not bear extra transaction cost when buying / selling due to frequent subscriptions and redemptions. It is traded only on the NSE (face value Rs 10) & it is India’s first ETF It is managed by the AMC of Benchmark Mutual Fund, which is sponsored by one Niche Financial Services Pvt. Ltd. The fund manager is Vishal Jain. This Mutual Fund maintains other ETFs also – like, Gold, Bank, Derivatives and others. The total average assets under management by the Benchmark MF are Rs 1,213 crore as on 31st of August, 2009. Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 2 of 8
Entry Load is NIL Exit Load: With effect from August 01, 2009, Exit load (technically referred as CDSC) (if any) of up to 1% of the redemption value charged to the unit holder on redemption of units shall be retained by each of the Schemes in a separate account and will be utilized for payment of commissions to mutual fund advisors and to meet other marketing and selling expenses It is open-ended mutual fund For tax purposes, it’s considered as an equity-oriented mutual fund. Longterm capital gains tax (for holdings of more than one year) is NIL. Short-term capital gains tax (for holdings of less than one year) is 15 per cent, plus surcharge (if any) and 3% education cess STT is applicable for buying and selling of units of NIFTY BeES on NSE As NIFTY BeES is bought from NSE like any share, brokerage needs to be paid by the investor for buy/sell transactions Dividend distributed by AMC for NIFTY BeES is exempted from Dividend Distribution Tax (DDT). Dividend is not taxable in the hands of individual resident Indian tax payers. Benchmark AMC declares dividends on NIFTY BeES, now and then. The latest dividend was Rs 4.50 per unit of NIFTY BeES paid with record date of 15.07.09. Previously dividends were Rs 5.00 (12.09.08) and Rs 8.00 (05.01.07). NSE symbol: NIFTY BEES NIFTY is calculated using the Free Float methodology Fifty stocks that are part of NIFTY Index are selected based on high degree of liquidity Assets under management as on 31.08.2009 for NIFTY BeES: Rs 214 crore. As on September 29th, 2009; a total of 47.37 lakh units of NIFTY BeES are issued to investors. It is highly liquid from an individual investor’s point of view NIFTY BeES is a passively managed fund. NIFTY BeES’s underlying will be in proportion to the weight of the constituents of Nifty 50 index.
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 3 of 8
Total expense ratio of NIFTY BeES is 0.50%, which is one of the lowest in the universe of index funds managed by all mutual funds in India Tracking error of NIFTY BeES is 0.26% annualized. It is the lowest among all index funds. Tracking error is the difference between NIFTY BeES and its benchmark index, that is, S&P CNX Nifty. The tracking error occurs due to some factors, like: a small component of cash in the fund, difference in weights between the fund and the underlying index, etc. The tracking error of 0.26% is negligible from individual investor’s point of view. Trading of NIFTY BeES has been going on since its inception on NSE on 28.12.2001 All types of investors – whether retail or institutional – can invest NIFTY BeES has been consistently outperforming (to an extent of one to two per cent) its benchmark Nifty 50 index for several years
NIFTY BeES PERFORMANCE (as on Sep. 29th, 2009):
% RETURN
3-month
1-year
2-year
3-year
5-year
Since inception
NIFTY BeES
13.15
29.54
-0.01
12.29
24.61
22.84
Benchmark*
14.03
30.05
-0.14
11.74
23.71
-- NA --
Source: ValueResearch * Benchmark is S&P CNX NIFTY INDEX Returns upto 1-year are absolute & above 1-year compounded annual growth rate-CAGR
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 4 of 8
CHART SHOWING ONE-YEAR RETURN FROM NIFTY BeES: NIFTY BeES 1-YR RETURNS 600 500 Rs
400 300 200 100 9/29/2009
8/29/2009
7/29/2009
6/29/2009
5/29/2009
4/29/2009
3/29/2009
2/28/2009
1/29/2009
12/29/2008
11/29/2008
10/29/2008
9/29/2008
0
Source: NSE. Data as on September 29, 2009.One-year price chart.
In just 11 months, it jumped by 100%! You may not believe it, but it’s true.
CHART SHOWING ONE-YEAR VOLUMES FROM NIFTY BeES (on NSE):
9/29/2009
8/29/2009
7/29/2009
6/29/2009
5/29/2009
4/29/2009
3/29/2009
2/28/2009
1/29/2009
12/29/2008
11/29/2008
10/29/2008
5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 9/29/2008
Rs lakh
NIFTY BeES 1-YR VOLUMES
Source: NSE. Data as on September 29, 2009
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 5 of 8
WHAT IS THE REPRSENTATION OF NIFTY BeES’ TOP 10 HOLDINGS:
1 2 3 4 5 6 7 8 9 10
Nifty BeES – Top 10 Holdings
Company weight %
Reliance Industries Ltd
11.14
1
Infosys Technologies Ltd Larsen & Toubro Ltd ICICI Bank Ltd HDFC Ltd ITC Ltd Bharti Airtel Ltd HDFC Bank Ltd State Bank of India ONGC Ltd Total top 10 holdings
7.96 7.17 6.52 4.85 4.63 4.10 3.95 3.51 3.12 56.95
2 3 4 5 6 7 8 9 10
Data is as on Aug. 31,, 2009 Source: ValueResearch
Holdings worth Rs 5 lakh in NIFTY BeES will considered as holdings in the top 10 NIFTY Index components Reliance Industries Ltd
Market Value Rs lakh
0.56
Infosys Technologies Ltd Larsen & Toubro Ltd ICICI Bank Ltd HDFC Ltd ITC Ltd Bharti Airtel Ltd HDFC Bank Ltd State Bank of India ONGC Ltd Total top 10 holdings
0.40 0.36 0.33 0.24 0.23 0.21 0.20 0.18 0.16 2.85
Data is as on Aug. 31, 2009
The data on the right side of the above table gives an idea about the top holdings of an investor who is holding NIFTY BeES units worth Rs 5 lakhs on a given day, that is, August 31st, 2009. By buying units worth Rs 5 lakh, you’re indirectly holding Rs 0.56 lakh of RIL, Rs 0..40 lakh of Infosys, Rs 0.36 lakh of L&T and so on.
TOP FIVE SECTORAL HOLDINGS OF NIFTY BeES:
% holding
TOP FIVE SECTORS % 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
71.24
22.14
Energy
21.79
Financials
Source: ValueResearch
11.78
8.61
6.92
Technology
Diversified
Metals
Total top 5 sectors
Data as on Aug. 31, 2009
Note: Energy-RIL, ONGC, etc; Financials-ICICI Bk, HDFC, SBI, Axis Bk, etc; Technology-Infoysy, TCS, etc; Diversified-L&T, Grasim, etc; and Metals-Tata Steel, Sterlite Inds, Jindal S&P, etc
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 6 of 8
BUYING/SELLING NIFTY BeES DIRECTLY WITH THE BENCHMARK MUTUAL FUND: An investor can buy or sell minimum 10,000 units of Nifty BeES and in multiples thereof directly with the Benchmark Mutual Fund. This route is usually used by High Networth Individuals (HNIs) and institutions to buy this exchange-trade product. It is very convenient for corporates also. Minimum Lot Size
: 10,000 units
Price
: In exchange for a basket of Nifty securities and cash defined as “Creation Unit”
Eligibility
: Authorised participant or large institutions
For more on this ‘Creation Unit’, HNIs and institutions can visit: http://www.benchmarkfunds.com/creationUnit.pl?product=nb
THREE IMPORTANT RISKS: 1) MARKET RISK: The returns of this fund are linked to the movement of stock markets in India in general. If the overall market turns adverse, then the fund will give negative returns to investors 2) LIQUIDITY RISK: If sufficient volumes are not available on the exchange for the product, investors may not be able to buy new units/liquidate their holdings easily in the market and as such this investment involves liquidity risk (for small individual investors, this is not a problem at all) 3) TRACKING ERROR RISK: The fund may not be able to invest the entire corpus in the same proportion as in the underlying S&P CNX Nifty Index due to certain factors such as: expenses incurred by the fund, corporate actions, cash balances, dividend payouts, changes in the underlying index and regulatory policies.
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 7 of 8
MY OPINION & SUMMARY: NIFTY BeES is a low-risk financial product (low-risk compared to individual stocks). It provides reasonable returns with ‘below average’ risk. It is a very simple and easy to understand product. As the risk is lower, returns from NIFTY BeES will also be normal unlike shares which have the potential to be multibaggers. As the number of fund managers, mutual fund houses and number of schemes are increasing by leaps and bounds every day, it would be difficult for fund managers to outperform the indices (like, Nifty, Sensex, BSE-500) on a sustained basis in the long-term. (The author does not have any solid data to back his opinion.) Finding new stock ideas year after year is next to impossible in these times of greater higher volatility and abounding global uncertainties. As the NIFTY BeES represents the country’s top fifty companies on NSE through the Nifty 50 index, it would be very easy and convenient for individual investors to buy the stock market in its entirety without bothering much about the wild movements in the fortunes of individual company’s performance. However, one needs to keep in mind one’s overall asset allocation, individual’s need for liquidity and to have a broad outlook on market dynamics, prevailing sentiment, country’s economic situation, global factors, corporate performance, regulatory risks, political risks, etc. By investing through NIFTY BeES, individual investors will be relieved of the burden of poring over bulky annual reports, opaque financial statements, analyzing quarterly/periodical results minutely and scratching one’s head over declarations of bonus shares, dividends, rights issues, open offers, stock splits, etc. It is a good start with 15 or 25 per cent allocation for ETFs in one’s equity portfolio for individual investors who like passive investments. NIFTY BeES, as of now and according to the present available information, is much superior to other index funds* that are available to investors. (*These index funds can only be bought directly from mutual fund houses and not through stock exchanges; and these index funds have unreasonable tracking errors which may dilute the overall returns in the medium/long term)
PHILIP A. FISHER: "In the stock market, a good nervous system is more important than a good head." "What really counts in determining whether a stock is cheap or overpriced in not its ratio to the current year's earnings, but its ratio to the earnings a few year's ahead." P.S: For further information, please visit: www.nseindia.com, www.benchmarkfunds.com, www.valueresearchonline.com and www.vanguard.com. The above analysis is made keeping in mind the needs of individual investors. Mutual fund performance is subject to market risk and as such investors should do their own due diligence before start trading in NIFTY BeES.
Rama Krishna Vadlamudi, MUMBAI. [email protected]. Sept. 30, 2009
Page 8 of 8
