Friends if I talk about index
like Nifty 50 or many other indices about which you might not know
In this video, we will talk about different Indices about which an investor should have some idea
Other than this, friends, I am going to make today's video very interesting
In the last few days, or years' America's investment on indices has increased
Why did that happen?
Why investors who were interested in buying a particular share or two are now moving towards investing in Indices?
Why is ETF becoming so famous in the last few years'
What is the reason behind it? What is Index? How does it work?
How did the popularity of Index and ETF go up?
As an investor how does it impact you?
which could be very useful in your investment planning
I, Jagdeep Singh, Welcome you to the Groww Youtube Channel
Let's start with today's video
I will divide this video into different parts
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so let's start with, what is an Index?
So if I give an example of an Index
then Nifty 50 and Sensex, what are they and how were they made?
These are Indices which derives their value from 30 to 50 different companies
which was joined in order to create a particular index
If I give an example of Nifty 50
Nifty 50 comprises of 50 companies which are allocated different weightages
and the value derived from it is the overall price of the Nifty
If I talk about the current value of Nifty
then Nifty's value is of Rs.10768
This value has been derived from 50 different companies which have been given different weightages
Now, assume the highest value in Nifty has been given to Reliance at around 13%
When the value of Reliance goes up, the overall value of Nifty goes up
by the percentage of weightage assigned to it
If I talk about Sensex
the Sensex comprises of 30 companies, mostly large-cap companies
The weightage of the company is given on the basis of free-float market capitalization
How much is the market cap of the company? The more the market cap, the more the weightage
Now I will tell you a one more interesting thing
If I talk about Nifty 50's total market capitalization
then it is total companies listed on NSE's 66% market capitalization
which means it gives you a fair idea about all the companies listed
Other than this, If I talk about the top 2 indexes of any country
It is seen as an economic barometer
which implies how the economic activities in the country is happening
Like you know, when recession or downturn comes, the whole economy goes down
then all companies share prices also start going down
At the same time, If you see any index, then even their prices would have started going down
So like a barometer, it tells you, how are the economic activities performing in a particular country
If it is good then the Index normally goes up
If it is not good, the index usually goes down
Friends, In the first part, I told you what is Index
If you feel in the coming time, Nifty's prices are going to go up then how can you take benefit out of it
How can you invest in it
So friends if I talk about investing in Index, there are mainly two ways
First is Index mutual funds and second is of ETF
I want to tell you the benefit on why any investor would think of investing in Index
If I talk about the benefit of Index then you get exposure to different companies at a time
Now if I talk about MRF
Now if you want to get exposure in MRF in equity market
if you invest in their share price
then you will have to invest around Rs. 70000
But if you have to make an investment in small ticket then via an index you can exposure in different countries
whose share prices are very high and you cannot afford it as a investor
Friends, this is the benefit of investment in Index
Now I will talk about two investment options, first I will talk about index mutual funds
Secondly about ETF
what are the benefits of investing in both
One more interesting thing we will discuss here is the history of ETF
How did ETF become so popular in the recent time
and how do you think it will perform in India?
Now, friends, I will talk about Index mutual fund
If you invest in index mutual fund, assume if you choose an index mutual fund which tracks Nifty 50
then all of your money with EMC for that particular mutual fund
then that particular mutual fund manager, like the consolidated Nifty
It invests money in the same weightage and percentage in different stocks
and it tries the returns coming out of Nifty comes out of a particular mutual fund
so that if you are investing in any mutual fund, the biggest benefit is that you receive the same benefit
which Nifty 50 gives you
Other than this, there is another small benefit of investing in the index mutual find
You won't face problems of liquidity here
If I talk about liquidity then if you are investing Rs. 5k or 10k then you can remove it at any point of time
If you want to withdraw your money after one year then you can withdraw it at any given time
Guys, If I talk about the charges if investing in index mutual funds
and other charges to invest in large-cap mutual funds
there is a huge difference between these two
to invest in Index mutual funds, the charges are very less
the important reason behind it is when you invest in large-cap
your fund manager has to research and choose stocks to invest
so that a good return can be obtained from here and can outperform its benchmark
If I talk about Index, the fund manager already knows which stocks he wants to invest in
cause of which his research charges and other costs get reduced, this benefit is passed on to the investor
I would like to again tell you that our index mutual funds expense ratio is way lesser than other mutual funds
Friends, Now I will talk about ETF
Exchange-Traded Funds
which is very famous in US
I would like to discuss its history on how did ETF get famous
If I talk about its popularity, the ETF started gaining popularity from 2008
From 2008, financial crisis, people's interest in ETF has gone up
Now I will give you an example which will tell how analysts are predicting the future of ETF
The example is of an analyst from Bank of America
He tells us that by 2030, the index market will touch 50 trillion dollars
which is a really big no.
So friends if I read out his whole statement
He writes...
According to him by 2030, ETF would be a 50 trillion dollar industry
the reason behind it is people moving from active investing to passive investing
Passive investment means they don't want to invest in one particular share but want to invest in a particular theme
Other than this, they believe the biggest benefit in ETF is the tax efficiency
the costing is less in it and has increased transparency
that is why there are chances of a rise in ETF market in US as well as in other developing countries
Friends, I spoke about the US, If I talk about India on how the current ETF market in India is growing?
If I compare today's ETF market with 2015's then you can see an increment of 1000%
which means there has been tremendous growth in the last few years
If I give you an example then ETF's AUM was of Rs.13800
but if I talk about May 2019, from Rs. 13800 Cr, it has reached Rs.1,41,500 Cr
then you can imagine the growth in no. of people investing in ETF
If I talk about a common investor, between ETF and Index which one should he choose
then from the cost basis, ETF outperforms Index mutual fund
but in Indian market, there is still some liquidity problem when it comes to ETF
cause of which index does better than ETF in India
If I have to say something positive about Index mutual fund then
for a common investor, there won't be any liquidity problem
Whenever you want to sell and withdraw money, you can
Friends, after this I come to video's last face wherein
I will explain the three indices, every investor should know about
First, Nifty 50, about which 90% to 100% investors would know about
If they don't know about its composition then they will at least know its value
Friends, if I talk about Nifty 50's composition
then the most weight is given to its financial services at 38.38%
Secondly, the Oil & Gas sector at 14.76% in which Reliance is a big player
If I talk about weightage, the weightage wise Reliance is the highest at 12.45%
After Reliance is HDFC bank, it's weightage is at 12.56%
The name of the second index is Nifty Alpha 50
What is the meaning of Alpha here
and you might have heard of Alpha many times, but could not have understood the meaning
Many times you might have heard that this particular fund manager has raised more Alpha
Alpha is positive, What is it's meaning?
Alpha here shows as if you have invested in a particular share and I compare it with market
so in comparison with the market, how much has the asset outperformed
Like say you invested in stock A which gave you a return of 20%
now say the overall market gave an investment of 10%
then your Alpha is of 10% which means by 10%, the stock has outperformed the market
If we talk in detail on Nifty Alpha 50
then it launched in November 2012
and this index has given a CAGR return of 18.32%
which means this particular index has outperformed Nifty 50
Friends, If I talk about its composition
then the highest weightage has been given to Adani green energy at 6.27%
Friends, after Adani Green group, Naveen Fluorine International Ltd has 3.59%
Abbott India has 3.33% and more
so you can see how well this particular index has outperformed
and it contains companies which have more Alpha than others
Friends, the next and third last index
The name of it is Nifty Next 50
Now you would like to know, what is Nifty Next 50?
then friends, you might know about N 100, Nifty 100 companies
which tells us, which are the top 100 companies in India
from that top 100, if I pick the first 50, it makes Nifty 50
The top 50 companies are called Nifty 50 and the rest is called Nifty next 50
Now, why is Nifty Next 50 so important for any investor?
So, friends, you might know in Nifty 50, some stops keeps getting added and some get subtracted
But in Nifty 50, the stock which got added is majorly from Nifty top 50
Like for example, Shree Cement was added in Nifty 50 which was earlier in Nifty Next 50
So If you analyze well, Nifty top 50 can tell you which is the stock that can move to Nifty top 50 in the coming times
Friends, Nifty Next 50 was launched in 1996
From inception till now has given a CAGR return of 14.71% which is considered to be good
If I talk about weightage, highest weightage has been given to financial sector
Secondly, consumer goods then pharma sector
If I talk about companies then the highest weightage is given to HDFC Life insurance company
Avenue Supermart, SBI Life Insurance company, Divis Laboratories Ltd
These companies tell us which company has been given the highest weightage in Nifty Next 50
Friends, I hope you might have liked this video
If we have taken any company's name in the video then it is only for educational purposes
We never advise you to invest in a mutual fund or a particular stock
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