Almost anyone who invests would’ve come across the disclaimer “Past Performance Is No Guarantee of Future Results”. In spite of this blatant warning, many investors only consider the past performance when choosing between different investment options. Some look at fund managers, the repute of the AMC, and many others even dig-deep to analyse portfolio holdings.
There is no one right way to choose between various investment options – but if you were to take the advice of the world’s most famous investor, Mr. Warren Buffett would recommend that you focus on costs and invest in low-cost index funds. So much so that this is exactly the instruction he has left in his will in order to manage his wife’s money after his death!
Index funds track the returns of an index by investing in exactly the same stocks as in the index – and in exactly the same weightage. For example, if the Nifty-50 has Infosys with a 6% weightage – the index fund which tracks the Nifty-50 will also have Infosys as 6% of its portfolio.
This way, index funds generate returns that are almost identical to that of the index. And because the index fund doesn’t need to hire a team of researchers & portfolio managers to constantly monitor the market, they are able to significantly reduce costs. As such, they are far cheaper than most mutual funds – the difference being as low as 0.10% TER for certain passive funds & TERs of 1.50-2.25% for many active mutual funds.
The Nifty-50 & the Nifty-Next-50 are 2 of the most popular indices in India. Together, they cover the 100 largest stocks by market-capitalisation in India – all of which are classified as large-cap stocks. These companies are usually well established & the chances of such companies failing are low. These stocks also tend to be less volatile due to their size & increased participation from institutional investors, amongst other reasons. As such, adding them to the portfolio not only increases stability but also enable long term wealth creation with minimal risk.
To conveniently add this to your portfolio, we have created the Top 100 Stocks – Smart Beta smallcase, which is comprised of the Nifty BeEs & Nifty Junior BeEs ETFs. While the weightage of stocks in the ETFs is determined by the index, we use a smart algorithm to decide how much money should be allocated between the 2 based on market conditions. Moreover, these funds are also extremely low-cost, have TERs of 0.11% and 0.23% respectively, making the current total cost to be a mere 0.13% at the current weightage!
This smallcase is ideal for anyone looking to build long-term wealth powered by industry leaders at minimal risk. In just 1 click, you can invest in the top 100 market cap companies as well as get automatic rebalance updates and set up a SIP for to invest in a disciplined manner.