HDFC Index Fund-Nifty 50 Plan – Direct

The HDFC Nifty 50 Index Fund has 99.95% investment in domestic equities, of which 85.78% is in Large Cap stocks, and 2.47% is in Mid Cap stocks. Launched on January 1, 2013, the fund has grown to the size of ₹ 7,411 crores, with a portfolio Turnover Ratio of 8.94% as against 41.04% in the category average turnover ratio.
Its benchmark is marked against the Nifty 50 Total Return, and there is no lock-in for the investment. This ten-year and one-month-old scheme from the house of HDFC Mutual Funds is under the management of Mr. Arun Agarwal.

Pros and Cons

How to Invest in HDFC Nifty 50 Index?

The HDFC Nifty 50 Index Fund belongs to a subcategory of mutual funds that have a portfolio built to closely resemble or follow the components of a market index. Investors should take due note of the market and portfolio compositions before investing. The percentage of stocks in index funds will be identical to that of the Benchmark they represent.
For instance, this index fund that follows the Nifty Index will contain all the equities in precisely the same proportion as the Nifty index.

The returns given by the index and the returns supplied by the scheme, however, can occasionally differ slightly. The term’ tracking error’ is referred to as this phenomenon, and the lesser the tracking error, the better the fund proves to be. So, investors should always go for the fund showing fewer tracking errors.

What is the expense ratio?

The connotation’ Expense Ratio’ means the yearly sum of money one needs to pay as remuneration to the company for managing your investments in that mutual fund. It will help if investors go for a lesser expense ratio, as the fund operating fees get deducted by this, leading to greater returns.

Who should invest in HDFC Nifty 50 Index?

Investors who are not comfortable with exercising technical decision-making about the stock market, or are new to the game, must choose the HDFC Nifty 50 Index Fund. Investment in this fund is very easy and simple and doesn’t require a person to be too well-versed in the nitty-gritty of the investment process.
Since the portfolio of this fund is designed such that it adheres to the NIFTY 50 index and resembles its composition closely, it is suitable for investors who do not wish to deviate much from the benchmark while, at the same time, wanting diversification.
At least seven years of time-period is required for the capital to mature when invested in this fund as otherwise, it may face fluctuations when invested in for a shorter term. Only over the long run, the returns in the range of 10% to 12% can be foreseen. Hence, this fund is ideal for investors who are looking at a long-term investment horizon for themselves.

Benefits

● To ensure that investors receive the highest possible returns on their investments made, the HDFC fund managers make every effort with their professionalism to lower the tracking error of index funds. Investors benefited much in their endeavour from this.
● Since the fund is passively managed, the expense ratio turns out to be much lower than most other funds in its category. Resultantly, investors are left with a higher profit margin as much less cash is expended from their pockets before the returns begin accruing.
● The tax structure of this fund is very affordable and flexible. Newer investors who may not have very strong financial backing are benefitted from this. Under the fund, the redemption of the units of index funds will earn you capital gains which are taxable and dependent on the duration of the investment.
● Being of a diversified nature, HDFC Nifty 50 Index Fund reduces the risk associated with the investment portfolio. It is less vulnerable to risks and volatilities associated with equity as they replicate an index benchmark. Hence, they are ideal in times of a market rally and can fetch lucrative returns.
● This fund is easier to manage relatively than others since investors do not feel the need to worry about the performance of specific funds other than what they are concerned with. It is germane for well-organised markets as well.
● Its trailing returns over different time periods are -5.5% (1yr), 15.22% (3yr), 11.65% (5yr), and 14.6% (since launch), as against Category returns for the same time duration, such as: -5.36% (1yr), 15.29% (3yr) and 10.82% (5yr). Overall, it is guaranteed to exceed the average expectations of an investor.