Mutual funds are the best way to currently tap the equity markets which are at a record high and this can be best done via the SIP route. As any correction in the future course shall enable an investor to average on cost. Now if you are sure about getting into equities but do not know the type of mutual fund to bet on, you can at best go with the Index funds that replicate the return of a particular index which also provides exposure to all the underlying securities in the index.
Further for best and optimal returns from the mutual fund class, one has to be mindful of expense ratio as well as the tracking error which should be also lowest for the fund when compared to the index returns'.
Here are 5 such Index Mutual funds with the lowest expense ratio in the range of 0.1-0.15%
1. ICICI Prudential Nifty Index Fund-
For the direct plan, the fund carries an expense ratio of just 0.1%. Index is primarily suitable for those investors who are looking at long term wealth creation and aiming to get returns at par with Nifty 50 index.
The fund as of May 31, 2021 commands an AUM of Rs. 1696.95 crore.
SIP in the fund can be started for as less as Rs. 100.
The index fund from ICICI Prudential has managed to offer 1-year return very close to the Nifty 50 TRI i.e. with a low tracking error.
Some of the top Nifty stocks that form the part of the ICICI Prudential Nifty Index Fund are RIL, HDFC Bank, Infosys, ICICI Bank, TCS etc.
2. ICICI Prudential Sensex Index Fund-
Here also for the direct plan the fund entails a expense ratio of just 0.1 percent. NAV of the fund as on July 5, 2021 is 16.83 and the fund is given a 5-star rating by Value Research. The fund AUM as on May 31 has been Rs. 266 crore. In terms of 1-year return, the fund has lagged the benchmark which has delivered 52% return, while the fund has given over 47% return.
SIP in the fund can be started for as low as Rs. 100 and a SIP started 3 years ago has managed to be Rs. 4.91 lakh in value with an investment of Rs. 3.6 lakh.
Majorly the fund is allocated into large cap with financials forming the bulk of the holdings i.e. as much as 42%.
3. Nippon India Index Fund-Sensex Plan:
Nippon India Index Fund-Sensex plan in case of the direct plan charges an expense ratio of just 0.15%. This fund has been rated with 2 stars by CRISIL, while Value Research has accorded the fund a 4-star rating. This expense ratio is less than most other large cap mutual funds.
AUM of the fund as on June 30, 2021 is Rs. 148 crore. Furthermore, there are exit load charges as well which have been pegged at 0.25%.
Over the last 1 year, the returns from the fund have been 47.71% and since launch it has offered 13.01% average annual return. Every 2 years, investors can see their money doubling in value. Furthermore, most of the funds' corpus is put into financial, energy, FMCG, construction sectors. The top 5 holdings of the fund are in Reliance Industries Ltd., HDFC Bank Ltd., Infosys Ltd., Housing Development Finance Corpn. Ltd., ICICI Bank Ltd..
4. Motilal Oswal Nifty 50i Index Fund
This fund intends to provide return close to the Nifty 50 index subject to tracking error. The expense ratio charged by the fund for the direct plan is 0.1 percent.
AUM of the fund as on June 30, 2021 is Rs. 73 crore. With a moderately high risk, the fund's 1-year return has been close to 50%. Since inception, the fund's absolute return has been close to over 30 percent.
Majorly fund is invested into financial stocks and top holdings include RIL, HDFC Bank, Infosys, HDFC, ICICI Bank etc.
Investors can invest into the scheme for as less as Rs. 500 through both SIP as well as in a lump sum way.
Note these charges or expense ratio i.e. charged for managing the fund is computed annually influences the fund's returns for its shareholders and hence the value of their investment. Say for an instance: If a fund with an investment of Rs. 10000 entails 2% as charges then Rs. 200 shall be payable by you as this charge and if on that fund, there is a return of say 12% your net return will turn out to be 10%. Thus lower expense ratio will always increase your profits and hence return on your investment.
Investing in mutual funds is risky and investors should understand the risk. Greynium Information Technologies and the author do not take any responsibility for losses incurred based on the decisions in the article. The article is meant for informational purposes only.