Can I invest in HDFC Sensex Fund?

HDFC Index Fund - Sensex Plan.

"The best way to own common stocks is through an index fund." - Warren Buffet, Chairman of Berkshire Hathaway. 

As returns from most categories of equity mutual funds have been disappointing, investors are increasingly looking at investing in Index Funds and Exchange Traded Funds (ETFs).

HDFC SENSEX FUND

The first question comes to everyone's mind is which Index Fund to invest? Should it be Nifty 50 Index Fund or Sensex 30 Index Fund?

Nifty 50 is a broad based index, the constituents and returns are similar to Sensex 30 index. The image below shows returns from HDFC Nifty plan and Sensex plan. 

NIFTY
NIFTY FUND
 

SENSEX FUND
SENSEX FUND

As you can see there is little difference in returns of these two indices, over longer periods. Recently the Sensex Fund has offered better returns, due the concentration of 30 stocks in the index.

Hence one can opt for either of them. Since there have been many queries about investing in Sensex Fund, highlighting the Performance of Sensex and HDFC Sensex Fund below:

Why to Invest in S&P BSE Sensex Index?

  • Index History: Launched in January 1986, the S&P BSE SENSEX is the oldest and one of the most prominent broad based benchmark in India.
  • Diversification: Buying a single unit currently offers diversification of 30 stocks across key sectors of the Indian economy that are listed at BSE.
  • Transparency: As indices are pre-defined, investors know the securities and proportion in which their money will be invested
  • The Index represents the large-cap companies and is calculated ona float-adjusted market-cap-weighted methodology.
  • The index generally attempts to maintain index sector weights that are broadly line with the overall market.

Fund Details:

Minimum Application Amount: Rs. 5,000 and Additional Purchase: Rs. 1,000.
Total Expense Ratio Direct: 0.10%.
Tracking Error (As on June 30, 2020) 0.19% (Annualised tracking error is calculated based on daily rolling returns for the last 12 months).
Benchmark: S&P BSE SENSEX Total Returns Index.

Summary:

Index Funds are an easy and convenient way to invest in an index. Index funds aims to minimize unsystematic risk (risk pertaining to companies, sectors etc) in the investor’s portfolio.

HDFC Sensex Fund with current Assets of 1000 cr and low expense ratio of 0.1%, is a better choice among other Sensex funds to invest into. 

Any investor who wants to participate in equity markets in an easy and convenient way, he or she should start with index funds, invest regulary in SIP mode. They should have Nifty 50 or Sensex Index Fund as their core portfolio and International Index like SPX 500 index fund as supplementary.

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