ETFs or Exchange Traded Funds have now gained huge popularity in the Indian market. This is attributed to increasing investor knowledge about various investment products, strategies, etc. However, there is still a long way to go as there are only a fraction of investors that actively trade in the market and have knowledge of the various investment products and their features.
ETFs are among the many investment products available in the Indian market that are ideal for every portfolio especially for beginners and allow them to make relatively risk-free trading.
What is Nifty BeES
Nifty BeES (Benchmark Exchange Traded Scheme) is the first ETF in India. It is a portfolio of individual securities or stocks that tracks the underlying benchmark S&P CNX Nifty. Like any other ETF, Nifty BeES can be sold in the open market like any other stocks and securities. Investors need to hold a Demat account and trading account for such trading in Nifty BeES. Each unit of Nifty BeES represents 1/10th value of S&P CNX Nifty.
Features and advantages of Nifty BeES
Nifty BeES has many attractive features that make it a good investment option for investors to gain higher returns at a lower value. Some of such features are discussed below.
Simplicity of fund
This fund is very simple like any typical ETF fund where the investors can invest easily and trade through the Demat account and trading account. The fund tracks its underlying Index to match its performance with minimum possible tracking errors.
Ease of trading
Investors can trade the fund in real time during market hours. Investors can trade by providing details of the transaction to be made to their broker through a call or by directly placing the orders themselves through their trading account. Investors also get the benefit of placing limit orders to minimize losses.
ETFs generally have a lower expense ratio as compared to many other investment products (like mutual funds). This fund also does not have any exit load as found in the case of many mutual funds. The expense ratio for Nifty BeES is tabled below.
|Daily Average Net Assets of the fund less than or equal to Rs.500||0.80% of Daily Average Net Assets|
|Daily Average Net Assets of the fund more than or equal to Rs.500||0.65% of Daily Average Net Assets|
ETF is a pool of many individual securities. This reduces the risk involved in investment unlike investment in individual stocks. Investors get exposure to 50 shares through a single unit of Nifty BeES.
Being able to be traded like any individual stock, this fund gives the investors the benefit of high liquidity. Investors can get liquidity through many sources like arbitrage through index futures, arbitrage through authorized participants with the underlying shares.
Elimination of Fund manager bias
This fund like any other ETF is a passively managed fund and tracks its underlying index (in this case, S&P CNX Nifty) with minimum possible tracking errors. There is no question of selecting the investments based on fund manager bias and trying to outmatch the performance of the fund.
Investment in Nifty BeES can be very transparent as compared to other types of investments. Investors can get information about the exact position or exact investment in every security of the fund at any point in time.
How to invest in Nifty BeES?
The investment process in Nifty BeES is very simple and can be done through online or offline trading, The details of the same are provided below.
Trading through the online portal provided by the broker is known as online trading of investments. Investors can take a call regarding their investments immediately on a real time basis through such a portal on their own without having to be dependent on the broker for executing the order.
Offline trading is when the investor informs the broker about a specific trade to be made through a phone call. There is no access or knowledge of the functioning of any online portal available in this case for the investor to execute the trade on their own.
Is NIFTY BeES a good investment?
Nifty BeES can be advantageous as it offers a low-cost, diversified investment option that tracks the Nifty 50 index, providing exposure to the top 50 companies in India. It offers investors the convenience of buying and selling units on the stock exchange, allowing for greater liquidity and transparency. Furthermore, it provides tax efficiency and flexibility in terms of investment amount.
Investors considering investing in Nifty BeES should be aware of potential risks associated with this investment format. These include liquidity risk, tracking error, and market risk. Investors must also consider the expense ratio associated with this investment versus other similar investment options.
Investment in Nifty BeES is one of the easiest approaches to build a good portfolio that is relatively risk-free but will also give good returns. There are many examples of Nifty BeES for the investors to choose from like Nippon India ETF Nifty BeES, Reliance ETF Nifty BeES, etc.
Frequently Asked Questions
Is investment in Nifty BeES good for beginners?
Yes. Nifty BeES track its underlying index without any pressure or need to outperform the same. This makes it a relatively risk free option for beginners or risk-averse investors.
Can Nifty BeES be traded in the open market?
Yes. Nifty BeES be traded in an open market like any other ETFs.
Can a person get a dividend on investment in Nifty BeES?
Yes. The fund will provide dividends as and when they are announced by companies in the portfolio. Investors have the option to reinvest the dividend in the fund or take the credit of dividends.
What is the value of every unit of Nifty BeES?
The value of every unit of Nifty BeES is equal to 1/10th of the value of S&P CNX Nifty.