Let us understand how to find the best Nifty Index ETF to invest in 2022 based on the average traded volume and expense ratio of the ETF
Let’s find the best NIFTY Index ETF fund to invest in 2022 for those who don’t want to deal with stocks and aren’t satisfied with mutual funds returns.
The best option after direct stocks for retail investors is always an index fund. However, they aren’t very popular as yet in India. Warren Buffett once challenged fund managers to give 1million USD to those who could beat S&P 500 index. The challenge period was from 2007 to 2017, and no active fund manager could beat the index.
You can watch the details of the challenge by Ajay Bagga here.
In India, ETFs are still a new thing. So when evaluating Index-based ETF funds, one has to look for the one that can replicate the index and has a higher volume to execute the trades when one wants to enter and exit.
Exchange-Traded Funds or ETFs, unlike mutual funds, require a demat account and are traded like stocks. Mutual funds try to beat the index, whereas ETF replicates the index. Know all about ETF’s here.
Index funds aren’t to outperform or underperform the underlying index. All the Index ETFs will have the same performance over time with almost no variation (or very slight variation) to the index.
Available Nifty Index ETF in 2022
The vital criterion to select the best Nifty Index ETF to invest in is the average traded volume for the ETF. If the average traded volume is meagre, you may end up paying a lot more because of the lesser number of sellers available when you want to buy. Similarly, when you want to exit, the same may happen on the downside, and you end up getting a lot less price for the units.
We will use the NIFTY 50 Index ETF and have the following ETF’s for the Nifty 50 Index. There are other ETFs available like Nifty 100 ETF or Nifty Next 50. The process to select the best ETF is the same. One should choose the one with maximum volume and least expense ratio.
| Symbol | Average Traded Volume |
|---|---|
| NIFTYEES | <500 |
| ICICINIFTY | 50k |
| KOTAKNIFTY | 200k |
| M50 | <500 |
| QNIFTY | <500 |
| IVZINNIFTY | <500 |
| SETFNIF50 | 100k |
| UTINIFTETF | <500 |
| BSLNIFTY | 50k |
| NIFTYBEES | 1100k |
*Average traded volume data is per NSE Website for the past week. You can click the link in the table to visit the NSE website and check the day’s ETF traded volume.
The Best Nifty ETF Fund 2022
We should choose the best Nifty Index ETF with the sizable volume with the minimum possible expense ratio.
Only 5 Nifty Index ETFs has considerable volume, aka KOTAKNIFTY, ICICINIFTY, SETFNIF50, BSLNIFTY and NIFTYBEES.
| Symbol | Expense Ratio (As of 30-Nov-2021) |
|---|---|
| ICICINIFTY | 0.05% |
| KOTAKNIFTY | 0.12% |
| SETFNIF50 | 0.07% |
| BSLNIFTY | 0.05% |
| NIFTYBEES | 0.05% |
Undoubtedly the best Nifty ETF fund to invest in 2022 is NIFTYBEES by Nippon India Mutual Fund. It has the best volume and low expense ratio, so it will always remain the best Nifty-ETF.
However, looking at the best Nifty ETF fund for 2021, KOTAKNIFTY has seen a significant increase in volume.
Final Thoughts
As always, this isn’t a recommendation of any fund or ETF. Instead, the emphasis is on the process. The ETFs may be doing well now, but use the same process and find the best ETF to invest in when you want to invest. Use ValueResearchOnline and NSE Website as and when you want to invest in 2022.
Don’t you think the fund managers in India are much smarter because I see the mutual fund returns beat the Nifty Index returns over a long term period as well.
Or is it the case that Nifty is an underperforming Index?
I don’t think either is true. The outperformance of mutual funds is because of not so strict guidelines earlier. So a large-cap fund had a significant chunk of its investment in the midcap segment and that resulted in so much outperformance. Now, we have better guidelines and so things will change.