Introduction 

If you have been reading or learning about the stock market for a while, you must have definitely come across the term nifty 50 several times.

The nifty 50 comprises the top 50 companies in different sectors and it gives you a general sentiment of the overall market.

Apart from the index mutual funds, do you think there is a way to invest in the nifty index? Well, there is a way and that is Nifty BeES.

Let us understand what is Nifty BeES and learn about its various aspects.

What are Nifty Bees?

Nifty BeES is an exchange-traded fund that tracks S&P CNX Nifty. It replicates the return of the Nifty Index. 

Nifty BeES, just like other ETFs, can be bought and sold in dematerialized form on the National Stock Exchange.

Nifty Bees stands for “ Benchmark Exchange Traded Scheme”. It offers the benefits of both mutual funds and stocks.

When were Nifty Bees introduced?

Nifty Bees was introduced by BENCHMARK, an asset management company on 8 January 2008. It was the first ETF in India.

Who manages Nifty Bees?

India’s oldest ETF Nifty Bees is currently owned and operated by Nippon India.

How to buy and sell Nifty Bees?

One can buy and sell Nifty Bees through their trading and Demat account. Just like equity shares, Nifty BeES can also be purchased on the national stock exchange.

These can be bought and sold during trading hours at the prevailing market price and attract brokerage fees similar to equity shares.

Once the buy order is placed and gets approved, the shares of Nifty BeES will get transferred to the Demat account.

One can invest in Equity BeES either through a lump sum or a Systematic Investment Plan (SIP) route.

What does 1 unit of Nifty BeES represent?

Each unit of Nifty BeEs is 1/10th of the value of the S&P CNX Nifty Index or commonly known as Nifty 50. 

The nifty 50 index tracks the top 50 companies from different sectors.

An investor gets the benefit of diversifying across 50 large companies by investing in Nifty BeES.

What is the minimum investment?

Nifty BeES is available to every investor since it is listed on the stock exchange. The buying and selling take place in real time.

The minimum investment is Rs 500 whereas there is no maximum limit to the investment. It is suitable for both small and large investors.

Since it is passively managed, there is no prejudice exercised by the fund manager when allocating the portfolio.

Nifty BeEs vs Index Mutual Funds

For any common investor, investing in index mutual funds is comparatively easier than Nifty BeEs.

ETFs trade like a share and very often there is inefficiency as ETFs tend to trade above or below Net Asset Value (NAV).

In the case of Nifty BeEs or ETFs, there is no option of giving standing instructions to do SIP at a particular date as in the case of index mutual funds.

Index mutual funds are available at a very low expense ratio like 0.10 – 0.20 percent compared to Nifty BeEs whose expense ratio is as high as 0.80%.

For a hassle-free investment in nifty, index funds are a better option for common investors.

However, Nifty BeES are a worthy investment if the investor looks for the benefit of both mutual funds and stocks.

Pros of investing in Nifty BeES

1. Simple & Economical

Investing in Nifty BeES is as simple as investing in equity shares. Buy and sell orders can be placed through the NSE terminal at the prevailing market prices.

The expense ratio is also not more than 0.80% of daily NAV including management fees. It is among the lowest expense ratio for any mutual fund scheme.

2. Transparency

Nifty BeES are passively managed and their performance is determined by the nifty index as well as the demand and supply of the fund. There is no manager bias for this ETF.

3. Diversification

Buying one unit of Nifty BeES provides exposure to 50 companies that are included in the nifty index. As a result, the risk is diversified.

4. Liquidity

There is no lock-in period or maturity tenure for Nifty BeES. Thus, one can exit from the scheme at any time during trading hours. Also, no exit load is charged on redemption of the units.

The trade volume is significant which provides good liquidity to the investor.

Cons of investing in Nifty BeES

1. Full margin requirement

Investors need to provide full margin while purchasing Nifty BeES as opposed to placing orders in nifty F&O.

2. Over-diversification 

As Nifty BeES constitutes all the 50 stocks of the nifty index, it can lead to over-diversification of the investment.

3. Performance linked to Nifty

The performance of Nifty BeES is correlated to the nifty index. The returns will be lesser compared to actively managed mutual funds.

Conclusion

Investing in Nifty BeES is the most ideal way for the common investor to keep up with the market. 

Also, it provides investors with the diversification of their portfolio and generates consistent returns over a long period of time.

One thing to keep in mind is that although the return on the investment might be attractive, it carries high risk too.