Top Nifty index funds with lower tracking error and expense ratio

Tracking error and expense ratio are two important parameters to consider while investing in index funds. Continue reading to find out the top five Nifty index funds with lower tracking error and expense ratio. 

The Nifty 50 index now seem to have entered a recovery mode. Post making a lower bottom of 16,410.20 in mid-December 2021, Nifty 50 made a high of 17,944.70 in the first week of January 2022. With this, Nifty 50 breached its previous lower top of 17,639.50. However, at present, it is facing a resistance at 18,000 levels breaching of which on the upside, the index would start chasing 18,350 levels. 

Therefore, as of now, the upside potential is quite limited due to global cues, quarterly earnings and the rising cases of omicron variant welcoming a new set of restrictions across the nations. This indeed would provide you with the opportunity to buy the index at lower levels. And nothing better than index funds to buy an index. However, while selecting index funds, there are two factors that you should consider, one is the expense ratio and the other is tracking error. 

Expense Ratio  

This parameter is vital especially while investing in index funds. This is because the expense ratio is one such factor, that would eat up your returns. Hence, the lower the expense ratio better it is. Hence, while investing in index funds, invest in those funds having lower tracking error and lower expense ratio. The lower expense ratio will ensure better returns. 

Tracking Error  

Tracking error is nothing but a standard deviation of the daily returns of the index fund and its underlying index. The index fund manager needs to ensure that the weights of the individual stocks in the portfolio should match that of the underlying index. Therefore, there are chances that the Net Asset Value (NAV) movement of index funds might not be exactly the same as its underlying index. Hence, you should invest in an index fund that consistently maintains minimum tracking.  

Here is the list of the top five nifty index funds having lower tracking error and expense ratio.