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
In times of market volatility, Large-Cap stocks emerge as a more stable investment avenue. Currently, they are relatively well-valued compared to the broader market, making them an attractive option for investors looking for stability. Large-cap companies typically have strong financials, diversified revenue streams, and a long track record of navigating economic uncertainties. This gives them a higher ability to withstand market fluctuations compared to Mid-Cap and Small-Cap stocks, which are more susceptible to volatility. Moreover, large-cap stocks generally experience lower drawdowns and recover faster during uncertain market conditions.


Given their market dominance and the ability to generate consistent cash flows, they offer a cushion against extreme market swings. For those looking to gain exposure to large-cap stocks, an index fund is the ideal choice. Index funds passively track a benchmark index like the Nifty 50, ensuring diversification, lower costs, and eliminating the risks associated with active fund management. However, two key factors should be assessed before selecting an index fund. First is the tracking error, which measures how closely an index fund replicates the returns of its benchmark. A lower tracking error means better performance alignment with the index. Second is the expense ratio, which represents the annual cost charged by the fund house.A lower expense ratio ensures higher returns over the long term. UTI Nifty 50 Index Fund Direct-Growth stands out in the category. That is because it is a fund with one of the lowest expense ratios and a minimal tracking error of just 0.03 per cent, ensuring that it mirrors Nifty 50’s performance with high precision. The expense ratio of the fund was just 0.17 per cent at the end of December 31, 2024. With an AUM of Rs 20,000 crore as of December 2024, it is one of the largest index funds, reflecting investor confidence. This fund is suitable for conservative to moderate investors with an investment horizon of at least one year.

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