The objective of an Exchange Traded Fund are to emulate its benchmark index by replicating the same stocks in the same ratio in its portfolio.
The New Fund Offer (NFO) of Nifty Next 50 ETF launched by Mirae Asset Mutual Fund (MF) on January 13, 2020 will close on January 21, 2020. The benchmark index of the open-ended fund will be Nifty Next 50 Total Return Index that consists of 50 large cap companies which are next half of Nifty 100 Index apart from the top stocks that are part of Nifty 50.
The objective of an Exchange Traded Fund are to emulate its benchmark index by replicating the same stocks in the same ratio in its portfolio, which is called passive fund management. As a result, the management costs of ETFs are generally lower than the actively managed funds.
Subject to tracking error, the investment objective of the scheme is to generate returns, before expenses, that are commensurate with the performance of the Nifty Next 50 Total Return Index, which consists of smaller large cap companies, that provides a blend of large cap and mid cap segment both in terms of portfolio and performance.
Explaining the product, Rachit Chawla, Founder & CEO, Finway said, “The number of passive investment products that track Nifty Next 50 is growing. The latest one to throw the hat in the ring is Mirae Asset Mutual Fund, which has come up with a new NFO of Mirae Asset Nifty Next 50 ETF. For the first time, an investor who can afford some risks in high diversification, Nifty 50 Fund is effective as it has the stability of a large-cap. The new fund offer opened on January 13, 2020, and will close on January 21, 2020. The least amount for the application is Rs 5,000 and in multiples of Re 1 thereafter. The fund seeks to collect a minimum subscription amount of Rs 10 crore under the scheme during the NFO period.”
But will the fund suit your investment objective?
“If your tenure is more than 5 years, you may expect an annual compounded return of 12 per cent from here,” said Malhar Majumder, Partner – Positive Vibes Consulting and Advisory.
However, Malhar asked investors not to invest much, saying, “I suggest you go staggered and do not expose more than 20 per cent of your surplus.”
By investing in this fund, Ankit Agarwal, MD, Alankit Ltd, thinks the Investors can participate in the potential returns of future blue chip companies.
“A huge divergence is seen in the returns between Nifty 50 and Nifty Next 50 Index, and it is believed to get back to normal. Indeed, a good time and a wise choice for investors to participate in the performance of Nifty. Considered as well-diversified index that has stock and sector, and critically lower than index, Nifty 50 Index creates opportunity for investors to invest in this Scheme and reap good profit,” said Agarwal.
So, if you are not afraid of taking calculated risks and have long-term investment objectives, consult your financial advisor to decide if the fund will help you in realising your financial goals and how much you should invest and for how long.