Best Exchange Traded Funds (ETFs) to invest in 2020 in India

Articles > Submitted by raja on 5/5/2020 | Views: 372

I would cover all about ETFs, how to invest and what are the best ETFs available to invest as on May 2020 etc. EFTs are made available by both NIFTY and SENSEX and they are traded on their respective exchanges as if they are a stock. Let's see them in greater details.

Table of Contents

    What is ETF (Exchange Traded Funds)?

    Exchange Traded Funds are a kind of investment product that combine the flexibility of stock investment (buying selling instantly as if they are a stock) and simplicity of mutual funds. They are categorized as passive investment and are based on indices and invest in the securities (stocks/companies) in the same proportion as the underlying index.

    Ie. NIFTY Index contains index of 50 companies, so a nifty ETFs would invest in these 50 companies based on their weightage on NIFTY Index. As there is no extra ordinary effort and fund management, so its expense ratio is very less compared to mutual funds. Same is the case of Sensex ETF; Sensex ETFs would invest in the companies based on their weightage on the Sensex index.

    When is the best time to invest in ETFs?

    Generally, bear market or crash in the stock market is the best time to invest in ETFs, the reason is that during bear market, the indexes falls heavily (because underlying stocks falls), so one can get more number of units of ETFs. When market improves, the index goes up and investors get better return.

    The return on ETFs are almost similar to return on Indexes however there can be minor differences becasuse of some time lag by fund houses in investing in the same proportion of amount in the index companies.

    However, one can invest in SIP mode in ETFs at any time for long term to get better average rate of acquisition.

    How to buy ETFs?

    As the name suggest Exchange Traded Fund (ETFs), so they are marketable securities. They are traded in the exchange as if they are a normal stock. You can buy ETFs from your demat account by searching their name and placing order (as if they are a company share). Because of this flexibility, it is very liquid and you get your funds back into your demat account quicker than mutual funds. Short term and Long term capital gain taxes are applicable in ETFs.

    Best ETFs to invest in India

    While selecting for best ETFs to invest, I have considered the credibility and track records of fund houses as well apart from return on investment. I have ignored small fund houses.

    Name 1 year return 3 year return 5 year return Expense ratio Assets
    Nippon India ETF Sensex -17.53 2.92 4.20 0.07% 18 cr
    HDFC Sensex ETF -17.54 2.96 - 0.05% 76 cr
    SBI ETF Sensex -17.55 2.93 4.18 0.07% 20308 cr
    ICICI Pru Sensex ETF -17.43 2.88 4.15 0.08% 24 cr
    SBI ETF Nifty 50 -19.70 0.98 - 0.07% 53167
    ICICI Pru Nifty ETF -19.61 0.95 3.45 0.05% 1541 cr
    Kotak Nifty ETF -19.77 0.89 3.12 0.14% 863 cr
    Axis Nifty ETF -19.61 - - 0.07% 6 cr
    Mirae Asset Nifty 50 ETF -19.67 - - 0.07% 77 cr

    Assets data as on 31-Mar-2020 and other data as on May-5-2020. Data source: ValueResearchOnline

    From the above table, follwing can be concluded

    1. Sensex ETFs are performing better than NIFTY ETFs.
    2. SBI fund house are holding way more assets than other fund houses combined.

    As far as return on investments are concerned, following ETFs have better return 

    1. SBI ETF Sensex
    2. Nippon India ETF Sensex
    3. ICICI Pru Sensex ETF

    Important

    Though 5 years returns of these funds are just between 3% to 5%, however if you compare them with normal Equity funds, they are better. For example, SBI Bluechip fund return is 2.90% and HDFC Growth Opp fund return is -0.10% in last 5 years.

    As we are going through bear market phase right now, so in my view this is good time to invest in ETFs for those who can't track market frequently and want to get retuns based on Sensex and Nifty indexes returns.

    As per a stats, Nifty 50 index has given @13% CAGR from 1998 to 2019 that is far better than many mutual funds.

    Disclaimer: I am not SEBI registered, I do not hold any of these funds and this post is for educational purpose only.

    Website disclaimer: The views, opinions, investment advices (if any) expressed by author on Sharefunda.com are their own and not that of the website or its management. Users are advised to contact certified financial advisor before making investment decisions.

    Submitted by raja on Tuesday, May 5, 2020

    Wait for opportunity and grab with all hands like Eagle.

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