Unpacking Nifty Bees: Everything You Need to Know

As investors, we have heard numerous forecasts about the stock market from reputable organizations, including Morgan Stanley, which forecast that the Sensex may reach 68,500 by the end of December 2023, BofA, which made a clever forecast upon Nifty that it will reach 19,500 by the end of the year 2023, and many other organizations are their with their various projections.

As we can observe, most of the predictions are made on the basis of benchmark indices, i.e.Nifty and Sensex. Therefore, as investors, we need to put in extra effort to select the best performing stocks out of the huge list of stocks that could correlate with the benchmark movements. This might create confusion among investors regarding which stock will have more weight in benchmark movements.

In order to relieve investors from such confusion, ETF Nifty 50 Bees plays a major role. 

What is Nifty Bees?

Nifty Bees is an exchange traded fund, introduced in 2002, which replicates the movement of the Nifty 50 Index. The price of Nifty Bees is 1/100th value of the Nifty 50, for instance, if the Nifty is 16000, the 1/100th value of it will be 160 which will be near to the price tag of Nifty Bees.

Nifty Bees stands for Benchmark Exchange Traded Scheme and are bought on various brokerage platforms in the same way as other stocks are bought. It follows low risk and higher return policy as it is highly influenced by the Nifty 50 movements as the index comprises 50 best-performing stocks. 

So, if an investor has less capital and is not able to invest or diversify its portfolio, then investing in Nifty Bees will be the best alternative. As it makes your portfolio highly diversified with 50 best-performing stocks. 

Merits of Investing in Nifty Bees

No Fund Manager required: Every investor dreams of investing in best performing stocks with its limited capital. That is possible with Nifty Bees as it replicates the movements of Nifty 50 index which is influenced by the performance of top 50 best performing companies operating in various sectors. That’s why a fund manager is not required and commission paid to them otherwise will remain invested in the market. 

Liquidity: Nifty Bees ETF comprises high liquidity due to its rising demand by various investors.

Boon for young and small Investors: As India consists of the largest young population in the world out of which majority of them are either students or freshers in their job profile. Which ultimately leaves them with less amount of capital to invest in the market and for them investing in Nifty Bees will be the best way to invest in top performing companies with small capital.

Portfolio Diversification: Investing in Nifty Bees will automatically diversify your portfolio across best companies originating from various sectors. As diversification of portfolio is the key for successful investments.

Demerits of Investing in Nifty Bees

No dividend Payout: As in most stocks investors are entitled to get a dividend on the investments made by them. Nifty Bees do not offer this secured return in the form of dividend. This acts as one of the major drawbacks of investing in Nifty Bees. 

Do not guarantee Ownership: Although this is not the major demerit as it is does not impact small investors. Still it’s a disadvantage for the high net worth investors as they won’t get ownership of any company by investing solely in Nifty Bees.

Mutual Fund Vs ETF Nifty Bees

As both of them provide good and secured returns most of the time. Then let us find out who has an upper hand between the two, let’s discuss:

Limit Order: Mutual funds do not provide any facility of limit order. Whereas, in Nifty Bees investors could avail this facility easily as it is bought in the same way other stocks are bought. Which provides investors a flexibility in their investments.

 Automatic Diversification: As investing in Nifty Bees automatically diversifies one’s portfolio with a small amount of capital. Whereas mutual fund have less intensity to diversify their client’s portfolio with the same amount of capital

 Lower Price: Nifty Bees have trade on lower price as compared to the other best performing stocks. Which provides it an edge over mutual funds.

How Nifty Bees is Risk-Free?

Sustains Many Crashes: Though the stock market has witnessed many crashes in the past, it has recovered remarkably even after the deadliest crashes. Recently, after the covid crash Nifty along with all other indices bounced back exponentially in its aftermath as it did in many such crashes. So investing in the index indirectly will act as a shield against many future crashes.

Risk of good stocks turning bad: There is always an underlying risk of few stocks which initially had strong fundamentals turning bad in the long run due to reporting of frauds, money laundering cases etc. So, an investor who got lured by their strong fundamentals might be sitting with their red portfolio. Therefore, in order to protect them from such frauds there is always a way named diversification, but due to limited capital, most of the investors struggle to diversify their portfolio and that is where Nifty Bees come into consideration. As it has a lower price and is built collectively from top 50 best performing stocks.

Final words

At the end of the article, now it’s time to ask ourselves, can’t we consider investing in Nifty Bees as a way of value investing in the stock market?. Most probably the answer would be yes as investing in 50 best performing stocks collectively with minimal amount of 150-200 per unit could be taken as a joke but it’s a reality made possible by Nifty Bees and other index etfs.

So, if you are an investor having an optimistic view about the market, but don’t know even the “F” of Fundamental research. Then investing in Nifty Bees will be the best option for you to lower your risk and maximize your returns. This is also the way which could save you from investment tip providers as they only provide tips not the risk management strategies, which is the essential component required while investing in the stock Market.

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