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Every beginner in the stock market must be aware of ETFs or Exchange Traded Funds. This is a single fund dealing with a diverse collection of stocks. Not only is it a great option of investment for new investors in a stock market but also for experienced traders.
The Nifty BeES is one of the several exchange-traded funds (ETFs) available in the market that tracks the Nifty 50 Index.
Let’s study what is Nifty BeES in this post, including how it operates, the firms that are engaged, how to invest, and its advantages.
What is Nifty BeES?
So, what is Nifty BeES? The abbreviation for “Benchmark Exchange Traded Scheme” is Nifty BeEs. This exchange-traded fund seeks results comparable to those of the S&P CNX Nifty Index. Like any other rolling settlement share, they trade on the National Stock Exchange. It is a hybrid of a mutual fund and a share (equity securities) because it is an ETF.
Each Nifty BeE represents one-tenth of the value of the S&P CNX Nifty Index. There is ₹ 10 on the face. Additionally, investors may readily trade them using a demat account. Only in the dematerialised version are the units of this ETF available for purchase and selling. Being an ETF, the units are bought and sold at the current market price, or NAV. This ETF also allows for systematic investing by investors.
All fees included, Nifty BeEs’s expenditures total is 0.80%. Expenses will be 0.65% if the Asset Under Management (AUM) exceeds ₹ 5 billion. Of all the mutual funds in India, this one has the lowest Nifty BeES expense ratio. Thus, it is rather cost-effective to invest in this ETF. Furthermore, Nifty BeE returns resemble those of S&P CNX Nifty. Therefore, fund managers are impartial.
Since they are traded on the capital market, Nifty BeEs are very liquid. Limit orders are also accepted for these ETFs. Since Nifty BeEs tracks the S&P CNX Nifty Index, investors are always aware of the portfolio. Additionally, investing in the Nifty BeEs ETF provides diversity because a single unit may be used to purchase shares in 50 firms.
Three Things to Keep in Mind While Investing in Nifty BeEs
- Tracking Error: This is the variation in returns produced by Nifty BeEs mutual fund and the benchmark index. The ideal tracking error would be minimal.
- Expense Ratio: Nifty BeEs outperform index mutual funds in this regard. A reduced expenditure ratio directly improves your returns.
- Liquidity: Nifty BeEs are fortunately quite liquid for investors. The Nifty BeES ETF now have more liquidity thanks to the advent of nifty-based index funds. Nifty BeEs have better liquidity than Liquid BeEs. However, there is still a long way to go before it can equal Gold BeEs’ liquidity.
How to Invest in Nifty BeES?
How do you invest in Nifty BeES? You can invest in Nifty BeES using a Demat and Trading account. Acquiring BeES is comparable to buying shares/stocks through a Demat account. Additionally, you can purchase BeES at a specified limit price or the prevailing market price. Transactions, whether buying or selling, can be executed at any time during market hours, with applicable brokerage fees, similar to stocks.
Nifty BeES can be acquired through a lump-sum investment or a systematic investment plan (SIP). With lump-sum investment, you purchase units at real-time prices in a single transaction,; a strategy often favoured during market corrections or downturns. Conversely, SIP investment allows you to choose a date and make monthly instalments. This approach provides the opportunity to invest at various market levels over time.
Benefits of Investing in NIFTY BeES in India
Having learned the process of acquiring NIFTY BeES, it’s crucial to recognise the advantages it offers. Investing in Nifty BeES comes with various benefits that warrant careful analysis. Understanding these benefits is essential in mastering the art of purchasing NIFTY BeES. Some of these advantages encompass:
Simple to Manage
Managing NIFTY BeES is straightforward, and these funds offer cost-effective exposure to 50 companies with a nominal investment. Executing trades for NIFTY BeES is as convenient as trading equities on the stock market. Simply visit the NSE terminal to review the current prices of NIFTY BeES. Following that, you can proceed to buy or sell Nifty BeES ETF. The fund replicates the S&P CNX NIFTY, and its management expenses do not surpass 0.8%, ensuring that the overall investment comes with minimal finance costs.
Nifty BeEs mutual fund exhibits high liquidity, providing investors with convenient management options. Investors can buy or sell these funds in response to market price fluctuations. Since the fund is listed on the National Stock Exchange, investments can only be made during trading hours. However, limit orders can be placed anytime within these trading hours. Holding these funds in a Demat account alongside equity-linked instruments is possible. Notably, these funds are highly liquid, allowing for easy conversion into cash as needed. Their high flexibility adds to their appeal.
Understanding what NIFTY BeES is essential to invest in or monitor the NIFTY 50 index. Opting for investment in Nifty BeES ETF is a wise decision. These funds maintain high transparency, with the fund manager overseeing them impartially. Additionally, being a replica of the S&P CNX NIFTY Index, the fund mirrors its performance, making the fund manager’s skillset or knowledge inconsequential to its overall performance. Furthermore, you can check the fund’s holdings and monitor Nifty 50 BeES share price changes at any given time.
Diversifies the Portfolio
If you’re seeking portfolio diversification, it’s advisable to consider investing in these funds. By investing in these mutual funds, you gain simultaneous exposure to 50 companies, effectively mitigating the risks associated with the fund and introducing an element of diversification to your portfolio. Furthermore, exchanging the fund with a pre-defined portfolio is available. Additionally, it accommodates short-term trading for individuals who typically engage in long-term investments.
Nifty BeES is a suitable option for investors exploring equity markets while minimising their risk exposure. While the potential returns on this investment can be enticing, it’s important to acknowledge the accompanying high risks. Before making investment decisions, carefully assess your investment needs. Gain a clear understanding of your financial goals, and then make investments aligned with your objectives.
Short selling involves selling shares the investor does not own, often by borrowing shares from a brokerage. While short selling is a viable option for ETFs, it is important to note that short-selling Nifty BeEs is not feasible.
Similar to other stocks in the stock market, the Nifty 50 BeES share price undergoes daily fluctuations. To obtain the current price of the ETF, refer to the Nippon India ETF Nifty BeES page.
Reviews of the Nifty 50 Index are conducted every six months to verify that each security satisfies the specified criteria below. The index revision rules are thoroughly clarified, researched, and publicly documented. These rules are consistently applied to effect changes to the index.
Certainly, you have the option to retain Nifty BeES in your Demat account for the long term. Like stocks, you can invest in Nifty BeES through lump sum investments or on a regular basis, such as through a Systematic Investment Plan (SIP).
The distribution of dividends from NIFTY BeES profits is mainly contingent on the surplus funds available for dividend distribution. The fund manager is responsible for determining whether to distribute the funds and, if affirmative, the specific amount to be allocated for dividends.