Exchange traded funds or ETFs are good investment options for investors who want to replicate an index and don’t want to pay fancy fees for a fund manager. While actively managed funds have historically delivered superior returns, it may not always be so easy. With an army of research guys and so many investors, it is becoming tough to beat indices.
For instance, in 2018 year to date, no actively managed equity fund has managed to generate a positive return. However, there are dozens of ETFs who have done better. Many investors increasingly believe that an ETF is a better buy because it tracks an index and simply mimics the movement of that index. There is no fancy fund manager and paraphernalia involved. Of course, buying a mutual fund is much easier, and buying an ETF has to be done in the open market, just like buying a stock. Still, ETFs are an alternative way to generate wealth. RupeeIQ presents to you three promising equity ETFs for retail investors.
1. Motilal Oswal NASDAQ 100 Exchange Traded Fund: The James Bond ETF
Fund house – Motilal Oswal AMC
Launched in 2011, the Motilal Oswal NASDAQ 100 Exchange Traded Fund is arguably the best fund performer in the last 2-3 years if you exclude sector funds. It is a pure technology oriented ETF, since Nasdaq 100 is itself about technology. The ETF’s current biggest holdings are Apple, Amazon, Microsoft, Google (Alphabet), Facebook, Cisco, Intel, NVIDIA and NetFlix. Need we say more why this ETF has done so well? In last one year, the ETF is up 30%.
Disadvantage – The liquidity of the ETF is not good. Hence, you might often have to pay a much higher market price compared to the ETF NAV price.
2. Bharat 22 ETF: The Desi Dude
Fund house – ICICI Prudential MF
Bharat 22 ETF, launched in November 2017, has a delectable selection of stocks in its portfolio that tracks the Bharat 22 index. It’s not a PSU index tracker. The ETF’s biggest holdings are ITC, L&T, Axis Bank, SBI, NTPC, PGCIL, ONGC, GAIL, NALCO and CIL. The ETF is probably the cheapest ETF in India, with just 0.01% expense ratio. While the ETF has a short history, its portfolio could be very promising.
Disadvantage – The ETF has seen some investors using the product as a trading gateway, resulting in huge inflows and outflows.
3. Reliance ETF NV20: Value master
Fund house – Reliance MF
Launched in 2015, the Reliance ETF NV20 is value oriented. It tracks the Nifty 50 Value 20 Index. Its strategy has worked in 2018, with the ETF being the best performer amongst all funds including actively managed ones. You pay an expense ratio of 0.16% only for this ETF, which is a throwaway price for investing in 20 most liquid value blue chip companies listed on NSE.
Disadvantage – Value investing takes time and can be a roller-coaster ride. Value stocks do not always perform, especially when markets are buoyant.
Performance of ETFs
Returns in % (as on Oct 26, 2018)
|Motilal MOSt Oswal NASDAQ 100 ETF||97.83||484.11||-7.2||-9.5||-3||14.3||24.3||21.9||18.4|
|Reliance ETF NV20||12.78||506.71||-4.2||-9.3||-3.6||3.2||7.1||14.6||11.2|
|Kotak NV 20 ETF||3.77||50.59||-4.1||-9.3||-3.6||3.2||7.1||14.6||—|
|ICICI Prudential NV20 ETF||2.16||49.66||-4.1||-9.2||-3.6||3||6.9||14.2||—|
|LIC MF ETF – Sensex||361.83||349.55||-3||-8||-8.4||-1.5||3.2||10.8||—|
|HDFC Sensex ETF||47.35||3,503.48||-3||-8||-8.3||-1.5||3.2||10.8||—|
|Reliance ETF Sensex||15.31||355.18||-3||-8||-8.3||-1.5||3.2||10.8||8.4|
|ICICI Pru SPIcE Plan||3.45||354.69||-3||-7.9||-8.3||-1.6||3.1||10.6||8.3|
|UTI Sensex Exchange Traded Fund||3,141.06||350.71||-3||-8||-8.4||-1.5||3.1||10.9||8.5|
|Kotak Sensex ETF||11.9||343.97||-3||-8||-8.4||-1.5||3||10.6||8.2|