Nifty Bees is India’s first Exchange-Traded Fund  (ETF), which was introduced by BENCHMARK, an Asset Management Company on January 8, 2002, and is currently managed by Nippon India Mutual Fund.

Exchange-traded funds (ETF)

Before we move further, it is important to understand what are Exchange-Traded funds? Exchange-Traded Funds (ETFs) are essentially open-end fund schemes or index funds that are listed and traded on an exchange just like stocks. ETFs are often bought and sold throughout the trading day.

Buying/Selling of ETFs is as simple as buying/selling other stocks on the exchange allowing investors to require advantage of intra-day price movements. Another advantage of ETFs is that you simply can purchase even 1 unit and hence take exposure of the whole index at very low amounts.

ETFs are often bought and sold just by a call to the broker or through your online trading account. This provides a chance for investors to reply to changes within the market and even place limit orders while trading. Thus with ETFs, one can benefit both from the flexibility of investing in stocks as well as diversification of an open-ended fund scheme.

How to Buy Nifty Bees?

Nifty BeES is traded on the Capital Market segment of NSE/BSE and each of its units reflects 1/10th of the S&P CNX Nifty Index value. Nifty BeES units are traded and settled in dematerialised form like all other shares within the rolling settlement i.e T+2 days.

Thus, it allows you to trade real-time on NSE and provides you with real-time indicative NAV (net asset value). Nifty Bees is the first ETF (Exchange-Traded Fund) in India, which seeks to provide investment returns that closely correspond to the total returns of securities as represented by the S&P CNX Nifty Index.

This can be bought and sold like an ordinary stock on NSE and as it tracks NIFTY S&P CNX Index, it gives you a chance to trade intraday as well as providing you with the real-time NAV. 

Benefits of investing in NIFTY Bees 

There are various advantages of investing in the Nifty Bees

• Diversification: This provides diversification to your portfolio that you are looking for as it is a combination of stock and mutual fund and by buying Nifty Bees, you get exposure to the shares on the S&P CNX Index

• Lowest cost:  It’s a no-load scheme and as per the NSE website, the annual expense ratio including management fees is a maximum of 0.80% of the Daily Average Net Assets, which is one of the lowest for any mutual fund scheme in India. The costs further reduce to 0.65%, for assets over Rs.500 crore. The best thing is you can buy even 1 unit thus taking away the minimum subscription limit.

• Convenient:  As it is being traded like any other stock on NSE/BSE, you don’t have to fill any form or go to any other channel for investing. You can buy these at any point when the market is open.

• Liquid Fund:  This is the most liquid fund available and can be sold like an ordinary share in the market and funds will be credited directly to your bank account on T+2 day.

• Neutral fund:  As Nifty Bees mimics the movements of S &P CNX, the performance of Nifty Bees is dependent on the performance of NIFTY. Hence there is no bias from the fund manager.

• Transparency: Since the units are the shares of the Nifty 50, you can find out the performance of your portfolio by looking at the performance of these 50 stocks

• Equitable Structure: The unique “mechanism of redeeming Nifty BeES by exchanging a pre-defined portfolio is to make sure that long-term investors don’t bear the value of short term trading as observed in traditional Open-ended structures. This process insulates long-term investors from short-term trading activity.

If you are looking for a diversified portfolio and you do not have the time to look and rejig your portfolio, then you should invest in the NIFTY Bees as it is free from the bias of a Fund Manager, gives you exposure to 50 stocks on the S&P CNX Index and insulates you from short term trading activity.