Jagoinvestor

January 16, 2009

What is Nifty BeEs ?

Nifty BeEs an Index based ETF, which tracks Nifty index . Nifty BeEs can be a important part of your portfolio.

One unit equals around 10% value of index , Means if Nifty is around 3000 , one unit of Nifty BeEs will be around 300 (can be less or more a bit also , depending on demand and supply)

Some Advantages of Nifty BeEs

Simplicity : It is very simple to invest in Nifty BeEs, You can buy and sell it easily on stock exchange from your demat account, treat it just like a share.

Economical : It has 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 costs reduce further to 0.65%.

Liquidity : Any time you want money, you can sell your units in the markets.

No Human Error or Bias : The performance of Nifty Baes is simply the result of performance of shares in the S&P CNX Nifty Index and demand & supply in the market. There is no Fund manager bias. Hence there is no chances of Human error.

If you see the returns, it has consistently outperformed Nifty.

Annual Returns
2008 2007 2006 2005 2004
Fund Return -51.28 55.97 41.49 37.75 12.30
Rank In Category 7/22 4/22 10/22 8/20 8/18
Category Average -51.78 49.97 39.13 37.22 10.16
S&P CNX Nifty -51.79 54.77 39.83 36.34 10.68
Sensex -52.45 47.15 46.70 42.33 13.08

What are the disadvantages of ETF?

As such, there are no disadvantages , but obviously there may be many mutual funds which may perform better than Nifty BeEs, It may be because of good decision or pure luck.

Who do ETF work?

See this article from Deepak Shenoy to know about this.

My view

Any one who wants to participate in long term growth and with less risk can divert some part of his cash in Nifty BeEs. It scores really high when it comes to convenience and returns over long term. Its easy to purchase. Just invest some small amount every month with discipline over long term.

Other ETF’s

There are many other ETF’s you can go for, they are

ICICI Prudential SPIcE : Tracking NIFTY
UTI Nifty Index : Tracking NIFTY
PSU Bank BeES : Tracking Banking Stocks

ETF’s are the best way to invest in a sector, you can also go for sectoral funds , but these are ETF’s.

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17 Comments
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Adesh
Adesh
8 years ago

Hi Manish,

As I made a comment on one of your post that expense ratio of ETF may be less but if you consider the demat charges while buying and selling, the total expense comes out to be same as mutual funds. !!

So, you being running this awesome blog for so long must make it clear once for all this illusive feeling that etf are cheaper way is a myth than reality.

You even commented on my comment that you will do that but I wonder why you taking so long. !!

PSBhandaei
PSBhandaei
8 years ago

Thanks for providing information about nidty.
Pl. Keep me posted on nidty related issues in future.

Koran
Koran
8 years ago

I am big fan of Jago Investor and have recommended it to all my friends.
In this post, how can ETF outperform its index? ETF always has some expenses so its returns should be slightly less than the the index it is tracking. Also can you write a post comparing ETF and Index fund.

Amrit Goyal
Amrit Goyal
11 years ago

Hi Manish,
I have a question related to return of Nifty Bees.
When Nifty stocks declare dividends, the price of that share plunges by around the amount of dividend declared. This affects the total Nifty value.
Does this getting taken care of in ETF returns? I mean is the dividend declared by companies included in the ETF return as it is also part of the stock performance?

Jeetu
Jeetu
12 years ago

For investing in NIFTY Bees, is trading account is a must?

Balbir
Balbir
13 years ago

Hi Manish,

Is it advisable to buy the myself niftybees directly from my trading account rather than opting SIP in a index mutual fund?

Trying to understand the expense ration in both, while buying niftybees myself I do not see any additional expense other than trading amount (0.5%) charge from my broker 🙂

Thank you,
Balbir

Kishork
Kishork
14 years ago

Manish, Even I was of the view that NiftyBees ETF is good and better than most MF’s, But only untill I read http://businesspandit.wordpress.com/2009/07/16/efficient-market-hypothesis-in-india/ and also couple with the recent option to buy and sell MF online.

Manish Chauhan
Manish Chauhan
14 years ago

@KAMAL

Yes , i said in my first comment that you will get it.

I am not sure if your question is answed .
manish

White Lotus
White Lotus
14 years ago

I meant what happens to the dividends given by the stocks in the ETF? It is given out as ETF dividend?

Mutual fund dividends should be different than ETF dividends, since the ETF is supposed to track the market, they cannot give more than what the index stocks earned every quarter.

Manish Chauhan
Manish Chauhan
14 years ago

@KAMAL

Its works like mutual funds . When dividends are declared , you get the dividend and the value of ETF falls by that amount . But it soon catches up 🙂

Manish

Kamal
Kamal
14 years ago

Hello,
Thanks for the good intro to Nifty Bees.

Could you let me know how it handles the dividends from the Nifty stocks? Do the dividends get credited to investors account?

Regards,
Kamal