Fund of Fortnight

This is our mutual fund recommendation. Every fortnight, we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.[EasyDNNnews:PaidContentStart]



Reason for recommendation

Over the past six months, the broader market has outperformed the frontline market by a huge margin. Compared to the Small-Cap and Mid-Cap indices that generated return in excess of 40 per cent and 35 per cent, respectively, in these six months, Large-Cap indices such as Nifty and Sensex are up by only 15 per cent. This clearly shows that large-cap funds, which invest more than 80 per cent of their corpus in the top 100 companies by market capitalisation, offer better risk-reward ratio. Hence, our suggestion for this issue is a large-cap index fund. To gain exposure to the Nifty 50 universe, you can consider a Nifty 50-based index fund – Bandhan Nifty 50 Index Fund Direct. There are not many parameters that you need to analyse while selecting an index fund other than the underlying which in this case is Nifty 50. The true beauty of index investing lies in its simplicity, cost-efficiency and the ability to deliver market returns. Tracking error and expense ratio are the key metrics that investors should carefully consider.



The tracking difference is simply the difference between returns generated by the fund and its benchmark. Tracking error measures how closely an index fund’s returns match the returns of its benchmark index. It quantifies the deviation between the fund’s performance and the index it aims to replicate. Lower the tracking difference, better the fund. It is calculated in percentage. A low tracking error ensures that the fund reliably tracks the index, while a low expense ratio minimises costs and maximises returns. By paying attention to these factors, investors can stay aligned with low-cost investing. Bandhan Nifty 50 Index Fund Direct ranks top in these two parameters among its peers. Overall, large-cap index funds are a good option for investors who are looking for a low-cost, diversified and tax-efficient way to invest in the stock market. Even when the market is trading higher, there are still benefits to investing in large-cap index funds.



 

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