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What is Nifty BeES? Explore the path to investing in Nifty 50 index

stock market

Published Date: 29 Oct 2024Updated Date: 29 Oct 20246 mins readBy MOFSL

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Introduction

Investing in the stock market has become increasingly popular over the past few decades. With various investment vehicles available to suit different goals, investment horizons, and risk tolerance, you are spoilt for choice. Among these, Exchange-Traded Funds (ETFs) have emerged as a popular pick for many. They are especially ideal for passive investment strategy. While most ETFs offer numerous, one in particular has gained significant attention – Nifty BeES (Benchmark Exchange Traded Scheme). This ETF is appealing to both novice and experienced investors. Let us dig deep into the intricacies of this investment option.

What is Nifty BeES?

Nifty BeES ETF is India's first traded fund, launched in December 2001, and managed by Nippon India Mutual Fund. It tracks the Nifty 50 index, which is representative of 50 companies listed on the National Stock Exchange (NSE). Nifty BeES gives you an efficient way to participate in the broader Indian market, where it mimics the performance of Nifty 50.

When you invest in Nifty BeES, you are essentially purchasing units that correspond to a fraction of the Nifty 50 index. Each unit represents 1/100th of the index. It lets you diversify your portfolio with large-cap stocks. With this passive investment strategy, Nifty BeES does not try to outperform the market. Rather, it mirrors the index's performance.

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Key features of Nifty BeES

Some of the essential characteristics of Nifty BeES are as follows:

· Pioneering ETF in India

Nifty BeES was the first ETF to be introduced in the financial market in 2001. It set the benchmark for similar financial products. It exposed you, as a retail investor, to the country's equity markets with ease.

· Tracks Nifty 50 index

One of the widely followed benchmarks in India, the Nifty 50 represents the top 50 companies by market capitalisation listed on the National Stock Exchange (NSE). Nifty BeES replicates this index and mirrors its performance.

· Low expense ratio

Nifty BeES attracts a low management fee compared to actively managed funds. As it followed a passive strategy, there is no active involvement of fund managers, which helps minimise operating expenses and stay invested for the long term.

· Liquidity and real-time trading

You can buy and sell Nifty BeES units throughout the trading day on the stock exchange. Such flexibility allows you to trade on intraday market conditions, unlike Mutual Funds, where transactions are carried out only at the day's closing Net Asset Value (NAV).

· Accessibility to investors

You don't need to do a lot to start your investment journey in Nifty BeES. It has a low minimum investment requirement. You can buy a single unit of Nifty BeES, which is equivalent to 1/100th of the Nifty 50 index at a relatively low cost.

Benefits of investing in Nifty BeES

Investing in Nifty BeES involves numerous benefits. Some of these are :

· Diversification

With your investment in Nifty BeES, you can automatically diversify your portfolio with 50 large-cap companies spanning various sectors such as finance, technology, energy, and consumer goods. It reduces the risk of investing in a single stock, which impacts overall returns.

· Ease of trading

You can do real-time trading with Nifty BeES throughout market hours. This is highly beneficial if you wish to capitalise on market volatility by executing trades instantly. Also, this ensures that large volumes of units can be traded without significant price fluctuations.

· Transparency

Nifty BeES offers a high level of transparency since it mirrors the Nifty 50 index. The constitutes of this index are publicly accessible. You can easily track the performance of this ETF to understand what you are getting yourself into.

· Tax efficiency

Long-term capital gains from ETFs are generally taxed at a lower rate compared to Mutual Funds. This tax advantage makes Nifty BeES especially attractive for long-term investing. You can maximise your returns while minimising the tax liabilities.

· Passive investment

If you prefer a hands-off approach with your investments, Nifty BeES is an excellent choice. Its passive investment strategy eliminates the need for constant monitoring and active management.

How to invest in Nifty BeES?

The process of investing in Nifty BeES is quite simple. To get started, you will need a Trading and Demat Account, through which you can buy or sell units on the stock exchange. You can then place limit orders to purchase and sell at your desired price. Lastly, you can monitor the performance of Nifty BeES on NSE.

Conclusion

Nifty BeES is a compelling investment opportunity if you are looking to get exposed to the Nifty 50 index. With its low expense ratio, real-time trading, and passive investment strategy, this ETF stands out as an attractive option for both novice and experienced investors. You can achieve long-term growth with Nifty BeES as it is simple and effective to manage, and it diversifies your portfolio. It is also highly liquid to help you redeem your holdings whenever required.