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How to invest in Nifty for long Term

Nifty Bees
Yes, you heard the right. Investment in Nifty with delivery without trading in FO Segment.

Nifty Bees, the first ETF in India, is being introduced by BENCHMARK, an Asset Management Company on January 8, 2002.

Nifty Bees trade on the Capital Market segment of NSE. Each Nifty BeES unit is 1/10th of the S&P CNX Nifty Index value. Nifty BeES units are traded and settled in dematerialized form like any other share in the rolling settlement.

Advantages of Nifty Bees

Simple: Nifty BeES can be bought/sold like a share through any NSE terminal at prices available on the screen. The underlying portfolio of Nifty BeES is very closely replicated that of the S&P CNX Nifty. Hence, Nifty BeES track the movement of the S&P CNX Nifty.

Economical: Nifty BeES is a no-load scheme. The annual expense ratio including management fees is a maximum of 0.80% of the Daily Average Net Assets, which is one of the lowest for any mutual fund scheme in India. The cost is reduced further to 0.65%, for assets over Rs.500 crore.

Convenient: As it is listed and traded on the NSE, Nifty BeES can be bought/sold throughout the trading day just by a call to your broker. This gives you the power to react swiftly to changes in the market. You can even place limit orders. Nifty BeES can be held in your DP account with other portfolio holdings.

Liquid: The structure of Nifty BeES attracts liquidity from various sources such as buying/selling by investors, arbitrage with index futures, arbitrage by authorized participants with the underlying shares.

Neutral: The performance of Nifty BeES is simply the result of the performance of shares in the S&P CNX Nifty Index and demand & supply in the market. There is no Fund manager bias.

Transparent: As Nifty BeES replicates the S&P CNX Nifty, investors can know at any given point of time where and how much is invested in each stock.

Instant Diversification: Investing in just one unit gives exposure to fifty shares of the S&P CNX Nifty. This allows investors to spread risk with one single decision.

An Equitable Structure: The unique "in-kind" mechanism of creating/redeeming Nifty BeES by exchanging a pre-defined portfolio ensures that long-term investors do not bear the cost of short term trading as observed in the traditional Open-ended structure. This insulates long-term investors from the short-term trading activity.

This gives the investor away from the worries regarding the selection of quality stocks and its performance in the future. Say, if one invests in a reputed company, namely ONGC, looking at its historical price and current CMP and the growth potential etc.

Credit: Moneycontrol

But the problem arises when everything is good
 and the economy is growing. However; the particular oil sector is on the verge of shrinking due to global crude practices etc. Thus the purpose of entire long term investment fails. In such a scenario, if the investment is classified and bifurcated across all the segments, it could generate much handsome returns.
Credit: Moneycontrol

So, one can start investing in nifty bees with a small amount like Rs. 5000 and gets the benefits of the diversification of the safest nifty 50 companies. If any company is performing badly, then it can see the way away from Nifty 50 and some other good performing company will replace it that ensures the good returns for you in any scenario for the long term. 

If you like this article, don’t forget to bless it with your tweet or share on your favourite social media.  Further, you might like to read Following Trading Journey:

An MBA Specialized in International Business Turned Full-Time Trader cum Investor

Any questions hovering in your mind? The comment box is for you. Post your questions or suggestions there, we will reach to you sure.

How to invest in Nifty for long Term Reviewed by CA Jaykishan Pamnani on March 27, 2020 Rating: 5

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