ADITYA BIRLA SUNLIFE NIFTY NEXT 50: NFO REVIEW – Should you Invest?

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Aditya Birla Sun Life’s New Fund Offer will be an opportunity for investors who are willing to add passive investments to their portfolios.

Many questions may arise in your mind like…

Why should I invest in this fund?
Is Nifty Next 50 will be a good option to invest in?

The majority of these questions have been answered in this article.

ABOUT-ADITYA BIRLA SUN LIFE:

Aditya Birla Group and Sun Life Financial were joined to form Aditya Birla Sun Life Mutual funds and it is one of the largest fund houses in our country.

New Fund Offer had been launched by ABSL recently targeting the Nifty Next 50 Index due to their ability to become the future blue chips.

ABSL NIFTY NEXT 50 FUND – THINGS TO KNOW:

ABSL NIFTY NEXT 50 FUND:INVESTMENT OBJECTIVE& Suitability:

The primary objective of this NFO are:

Providing returns that closely track the total returns of securities represented as the Nifty Next 50 Index.
To make a chance for high growth and wealth creation for investors willing to invest in this scheme.
This NFO will be suitable for investors willing to make long-term investments and securities covered by Nifty Next 50 Index.
Investors can make use of both SIPs and lump sum routes.

ABSL NIFTY NEXT 50 FUND: INVESTMENT STRATEGY:

The scheme will follow a passive investment strategy and will invest not less than 95% of its corpus in stocks comprising the underlying index and try to track the benchmark Index.

Nifty Next 50 offers stability, liquidity, better price discovery, and high corporate governance as they will be required during the volatility in the stock market. It is a well-diversified index with potential sectors to provide better risk-adjusted returns over long-term investments.

NATURE OF NIFTY NEXT 50 Index:

The companies ranging between 51 -100 in terms of market capitalization are referred to as Nifty Next 50.They are mostly smaller large cap stocks which makes the room for higher returns and higher volatility. Moreover, these 50 stocks have the potential to get included in the Nifty 50 Index in the future.Some of the key highlights of Nifty Next 50 are:

Better sectoral representation
Exposure to potential market leaders
Opportunity for high growth & capital appreciation

Predominantly large caps
Less top 10 holdings concentration than Nifty 50
Better risk-adjusted and long-run performance

PERFORMANCE OF NIFTY NEXT 50 OVER NIFTY 50:

Nifty 50 Index has comprised of only 13 sectors, whereas the Nifty Next 50 Index constitutes 17 sectors. It is a well-diversified large-cap index when compared to Nifty 50. For the past 19 years, the majority of the Nifty 50 Index are from Nifty Next 50 Index.Nifty Next 50 has consistently performed better than Nifty 50 in terms of CAGR (Compounded Annual Growth Rate) for around 20 years.

CAGR of Nifty 50 – 18.2%
CAGR of Nifty Next 50 – 21.8%

WHY SHOULD I INVEST IN ABSL NIFTY NEXT 50 INDEX FUND?

Aditya Birla Sun Life Nifty Next 50 can help you own large-cap equity at an affordable cost.It doesn’t require a Demat account and investments can be made with low minimum amounts.In India, Nifty Next 50 companies are the core after Nifty 50 so investments made on them won’t be a bad idea.

Since it is managed passively, expense ratios are low as compared to actively managed mutual fund schemes.It’s an opportunity for investors looking to add passive investments to their portfolios.Moreover, this scheme offers SIP, SWP, STP facilities along with exposure to equities.

It will be an opportunity for investors, to wait for better risk-adjusted returns at a low cost.Moreover, this fund will be suitable for ultra-conservative investors looking to complement their core equity portfolio with passive investments.

MAJOR DRAWBACKS OF ABSL NIFTY NEXT 50 FUND:

Since being a passive fund, we will not get more than market returns.
Based on the market outlook, the fund cannot change the allocation dynamically

Conservative returnscan be expected due to the non-exposure of small and mid-caps.
It will not be a suitable option for short-term investors.
Being an Index fund, it blindly mirrors the index. They don’t do any analysis on the underlying stocks and check the soundness of the company in which they are going to invest.

FINAL THOUGHT on ABSL Nifty Next 50 Fund:

ABSL Nifty Next 50 Fund will be suitable for very ultra-conservative investors who don’t want to invest in Active funds. This can be the next choice after investing in Nifty Index funds.

As ABSL Nifty Next 50 Fund is an NFO, we need to wait and check their expense ratio and their ability to maintain low tracking error. There are existing Nifty Next 50 Index Funds with less expense ratio and less tracking error.

ABSL Nifty Next 50 Fund is not suitable for investors who are looking for