I usually invest in Nippon nifty etf I have investment of more than 1 crore I also understand nifty will more probably move higher and so is the etf I have one confusion which is also stopping me for further investment is that if Nippon itself defaults then what will happen to my investment

Ans: Hello Sedrick and thanks for writing to me.

Nippon India Nifty Next 50 Junior Bees are index tracking ETF's and will give returns closely linked to the performance of the Nifty Next 50 Index and you can consider continuing your investment in them.

If you share details like your risk appetite and goals, I may recommend another scheme instead.

Ans: Hello Sedrick and thanks for writing to me. Nippon India Nifty Next 50 ETF is an exchange traded fund that tracks the Nifty Next 50 Index. As it is an ETF, you can purchase or sell the units in the open market.

You can consider investing in it for the long run.

Ans: Hello Sedrick and thanks for writing to me with your risk appetite and goal.

Apart from Nippon India NIFTY Next 50 Junior Bees, you can also consider investing in or beginning SIP's in active small and midcap funds over the long term to for wealth creation. India is a developing economy and active funds in the small and midcap space can and do outperform index funds in the same category.

Periodic rebalancing of your portfolio is essential to create long term wealth. Stepping up your SIP's every year will also help you create a larger corpus.

Ans: You invested Rs 2,00,000 in the Nippon India Nifty IT Index Fund in February 2024. Here’s a detailed evaluation.

Understanding Index Funds
1. Passive Investment:

Index funds replicate market indices.
They offer average market returns.
2. Low Management:

Lower expense ratios due to passive management.
Limited scope for beating the market.
3. Market Volatility:

Performance tied to the market index.
Susceptible to market downturns.
IT Sector Performance
1. Growth Potential:

IT sector shows strong growth.
High potential for long-term gains.
2. Volatility:

IT stocks can be volatile.
Sector-specific risks can impact returns.
Advantages of Actively Managed Funds
1. Higher Returns:

Actively managed funds aim to outperform indices.
Fund managers adjust based on market conditions.
2. Professional Management:

Expert fund managers make strategic decisions.
Better adaptability to market changes.
3. Diversification:

Actively managed funds can diversify across sectors.
Reduce risk by spreading investments.
Disadvantages of Index Funds
1. No Market Outperformance:

Index funds cannot beat the market.
Returns are limited to index performance.
2. Lack of Flexibility:

Fixed to the index composition.
Cannot adjust to market opportunities.
3. Sector Concentration:

Heavy exposure to one sector increases risk.
IT sector concentration may not be ideal for all investors.
Evaluation of Your Investment
1. Investment Horizon:

Your investment horizon is crucial.
Longer horizons can mitigate short-term volatility.
2. Risk Tolerance:

Assess your risk tolerance.
Higher risk tolerance suits IT sector investments.
3. Diversification Needs:

Diversify your portfolio to reduce risk.
Consider adding actively managed funds.
Recommendations
1. Stay or Switch:

If you have high risk tolerance and long horizon, stay invested.
For diversification and potential higher returns, switch to actively managed funds.
2. Regular Review:

Monitor your investment regularly.
Adjust based on market performance and personal goals.
3. Seek Professional Advice:

Consult a Certified Financial Planner (CFP).
Get personalized recommendations.
Final Insights
Your investment in Nippon India Nifty IT Index Fund has potential but consider diversifying. Actively managed funds can offer higher returns and better risk management. Regularly review and seek professional advice for optimal results.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in