July 23, 2016

Decoding a Nifty Next 50 ETF

June 10-11, 2016.  http://www.mydigitalfc.com/opinion/bdecodedb-gs-junior-bees-nifty-next-50-index-594


GS Junior BeES

GS Junior BeES (GSJB) is a 13-year old index ETF tracking Nifty Next 50 (earlier called Junior Nifty) index.


Capital appreciation is what GSC500F aims for through corpus
deployment in the 50 companies of Nifty Next 50 index in the same proportion as they officially weigh in the index.



Any index fund or index ETF is best-suited for all those equity exposure-seeking investors who do not have the time or the wherewithal to analyse the fundamentals of various listed stocks and who prefer not to go by the recommendations from their stockbrokers or other sources.



Since it is an ETF, you can buy and sell only through your stock broker on the NSE


Nifty Next 50 index, which GSJB is committed to mimic, has the second lot of largest 50 large cap stocks  after the 50 companies of Nifty 50. There are several ETFs on Nifty 50. There are also a few on Nifty 100  index which is made up of stocks of both--Nifty 50 and Nifty Next 50.

Should you simply invest in Nifty 100 ETF to get a large-cap equity exposure, or should you invest in one ETF each on Nifty 50 and Nifty Next 50?

For one, portfolio concentration (and therefore the returns) would vry in all the three cases. As of May 31, Nifty 100 had top 10-weighted stocks making up for 46 per cent of the total, while the corresponding top 10 weighted stocks concentration of Nifty 50 and Nifty Next 50 were 54 per cent and 34 per cent respectively. The 1-year return, as of Friday, was 0.7 per cent in Nifty 50, 4.4 per cent in Nifty Next 50 and 1.1 percent in Nifty 100.

It is better to taken an exposure to top 100 large-cap stocks by investing separately in ETFs on Nifty 50 and Nifty Next 50, instead of in Nifty 100 ETF.



Performance-wise, tracking efficiency is what matters to an index investor. The returns by an index fund or ETF should mimic the index as closely as possible.

The only comparable fund to  GSJB is ICICI Prudential MF's Nifty Next 50 Index Fund. The latter is an index fund which can be bought and sold directly with the AMC like any regular MF scheme.

As of March 31, the Nifty Next 50 Total Returns Index delivered a 1-year return of -2.2 per cent, as GSJB's latest factsheet. GSJB's 1-year return was -3.1 per cent while ICICI Pru's index fund's 1-year return was -3.2 per cent. With returns being almost same, choose whether you prefer an ETF or an index fund.

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