An index fund is specially designed for the portfolio of stocks and imitates the performance of a financial market index. Therefore, it follows a passive strategy of investment and a lower expense ratio than those actively managed stocks. Are you a beginner looking for lower fees and have meager knowledge about index fund investment?
Index funds are renowned among investors as they provide ownership of a wide array of stocks. More importantly, such a seamless ownership strategy will be available to you at meager risks and with greater diversification. As the name implies, such mutual funds mainly invest in staple indices, for example, Sensex, Nifty 50, and Nifty Bank.
Therefore, a beginner and intermediate investor can get extreme exposure to the whole index market through the investment criterion. So, what do you choose for investment? What to consider while opting for the best index fund with the lowest expense ratio? Let’s get straight to it!
Top Index Funds with Lowest Expense Ratios
1. Navi Nifty 50 Index Fund
Recently, on 25th June 2021, Sachin Bansal’s Navi Mutual Fund has proclaimed the inception of the Navi Nifty 50 Index fund. If you have been thinking of investing in the “lowest cost” category under passive funds, it can offer you an open-ended equity scheme. More precisely, such an outstanding new fund would alter the Nifty 50 index with the cheapest cost for investment ease.
What is the objective of the investment?
This Navi Mutual Fund aims to gain equivalent returns to the Nifty 50 Index. It can be possible after investing in various stocks of organizations consisting of the Nifty 50 index in order to track error.
On the other hand, Navi Mutual Fund proclaimed that it is the lowest and safest index fund schemes category. So, the proposed expense ratio is only 0.06%, which needs to be charged by the fund for its straight plan offering.
Besides, in the case of index funds, the proposed average category expense ratio is 0.25%. Moreover, various existing index funds’ charging expenses lie between 0.15-0.20%.
Why should you invest?
Sachin Bansal’s Navi Nifty 50 Index fund would be preferable for investors rummaging for securities investment, long-term capital appreciation, and quick access to the development of market leaders.
2. ICICI Prudential Nifty Index Fund – Direct Plan
The 4th one in the list offers the lowest expense ratio Index fund in India. Such index fund was previously known as ICICI Pru Index Direct (G), which carries the supremely low expense ratio of 0.1%. Here, it would be best to remember that such a lowest ratio of 0.1% will only be applicable for the direct plan.
Furthermore, the benchmark of ICICI Prudential is Nifty 50 TRI, and the fund size is Rs. 1697 crores. In short, the major holdings of the index fund are Infosys, RIL, HDFC Bank, and HDFC. Here, the significant portfolio leaned towards the larger cap and sectional towards the financial sector.
3. HDFC Index Fund- Nifty 50 Plan
Are you searching for a 3-star CRISIL rated index fund with an enormous asset size of Rs. 2928 crores? As per the Risk-o-meter, this HDFC Index Nifty 50 fund has a moderately high-risk bet. If you look into the NAV of June’s fund, it scored 144.5. However, this fund has provided a good return of 56.66% compared to the Nifty TRI of 57.42%.
Besides, anyone can start their SIP investment into the fund at a meager rate of Rs. 500. In brief, the fund’s major holdings comprise ICICI Bank, Infosys, RIL, Kotak Mahindra, and so on. The expense ratio of such a fund is 0.40%.
4. UTI Nifty Index Fund Regular – Growth
Such as an extraordinary UTI Nifty Index Fund regular – Growth possesses a maximum of 99.79% investment amid the Indian stocks. More accurately, it contains 23.11% and 75.64% investments in mid-cap and large-cap stocks. Are you interested in the passive fund? UTI Nifty index fund will cater to long-term wealth creation.
Moreover, it is also a CRISIL 3-star rated fund, which manifests average performance amid peers. Despite being a moderately high-risk fund, its fund size is quite bigger than HDFC fund, Rs. 3669 crores. In brief, the expense ratio of the UTI Nifty Index fund is 0.29%. However, significant holdings of the Nifty fund include HDFC Bank, Kotak Mahindra, RIL, and TCS.
How to Opt for the Top Index Fund?
You need to consider these two aspects before choosing any index fund. These are the following:
Tracking Error
Let’s take an example of two types of index funds, A and B. In index fund A, tracking errors are shown 0.75% compared to the benchmark. For index fund B, it is only 0.25%. Therefore, anyone will prefer to select a B index fund due to its lowered deviation or tracking error from benchmark returns.
Lowest Expense Ratio
This top 4 list of Index funds helps you select your preferable quality fund for investment. The enlisted index funds possess the lowest expense ratios. Being a significant consideration, never choose funds in terms of the lowest percentage only. However, charges are liable to the investors for fund management and other needs.
[N.B: No fund providers can guarantee you deliver massive returns on lower expense ratios. All you need to verify historical performance, reputation, AUM, investment motive, portfolio allocation of the fund manager to make a safe investment decision with the expense ratio.]
Conclusion
To conclude, funds, which integrate superior indexing strategies need active trading and less portfolio management. Hence, it reduces their operating fees. Furthermore, Index Funds with supremely lower expense ratios are advantageous for long-term investors, who love to gain exposure and track indexes to choose market segments over time.
Top 4 Index Fund details and the recent traction in the investment category are given above. So, index funds are the secured route to achieve premium exposure in the top rate equity markets, as mentioned earlier. The best investment professionals proposed an allocation of 5-10% in the index fund among one’s mutual investment mix.