When we talk about investing in stock market the first term click’s in our mind what the heck is this Nifty 50 and why Indian stock market guys always keep using this term repeatedly.
Well, I got you hence today I got you a comprehensive guide on What is NIFTY 50, how it works, how to invest in NIFTY 50, and so much more.
So let’s get started!
NIFTY 50 or National Stock Exchange 50 represents the top 50 biggest companies of India from across all the sectors listed on the NSE (National Stock Exchange – the biggest stock exchange of India).
Nifty is the biggest and most actively traded index in the world.
This index serves as the benchmark for overall performance of Indian Stock Market.
NIFTY 50 is the most important index in India introduced back in 3 November 1995.
In simple terms, if you wanted to know the health of Indian economy then you have to check how the NIFTY 50 index is performing, if it is falling then the condition of Indian economy is weak or if it is increasing then that means our Indian economy and our GDP is increasing.
Why?
The reason behind this is that as NIFTY 50 comprises of the biggest 50 companies or the blue chip of blue chip companies of India that contribute the most in our Indian GDP hence, if it falls then that is the sign that the big 50 companies of India are struggling to do their business and to grow it.
Hence, the NIFTY 50 growth is directly proportional to the growth of these big 50 companies of India.
NIFTY stock selection or reconstitution happens every six month on basis of and to become the part of NIFTY 50 composition the companies need to full fill these three criteria’s:-
Investing in NIFTY 50 got many advantages:-
To invest in NIFTY 50 there are 3 ways available to you:
A NIFTY 50 index fund is a passive mutual fund that aims to track the performance and stocks of the NIFTY 50 and mirroring its return instead of beating it as in case of mutual funds.n
They are passive managed by the fund managers hence, they have a lower fees then an actively managed mutual funds.
They are beneficial especially if you wanted to invest in actively managed large cap mutual funds because as per history rarely there is a blue chip mutual fund that has beaten the NIFTY 50 returns in long term consistently.
Thus, paying a fund manager an extra fees by investing in mutual fund is a bad idea, hence you can opt for NIFTY 50 index fund in such case.
NIFTY 50 ETF are the exchange traded funds that are traded on stock exchanges in real time like the stocks and they aim to mirror the returns of NIFTY 50.
Being passively managed, the fees on NIFTY 50 ETF is start from as low as 0.01%, that ultimately results in high net returns in long term.
To understand how index fund are different from ETF, checkout our in dept guide on ETF vs Mutual Fund vs Index Fund.
NIFTY 50 Derivatives are a contract such as future and options that derive their value based on NIFTY.
If NIFTY 50 increases, the value of future and options of NIFTY will also increase and vice versa.
Do remember derivatives are very risky and can cause complete loss of your capital. Hence, always take consultation from registered investment advisors or do complete research before investing in NIFTY 50 Futures and Options.
That’s all! Here is the complete guide about investing in NIFTY 50.
NIFTY 50 investing act a harness against the risk and loss you may face if you invest in stocks directly or through mutual fund.
With NIFTY, you get a wide exposure of the blue chip companies of Indian stock market.
But to get extra ordinary returns, you must try to diversify your investments too like investing in Small cap and Mid Cap mutual funds, debt funds, etc.
Disclaimer: The Honest American provides financial education, investing strategies, & stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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