ETFs or exchange-traded funds are funds that are traded daily on the stock exchanges. They mostly track an index. In global context, ETFs could be designed to track indices of stock markets outside India.
Benefits of Global ETFs
Look at the graph above. The graph compares historic returns of Nifty 50 (index tracking top 50 Indian companies), S&P 500 (index tracking top 500 companies listed in the US). Also, notice the 3rd line in the chart (S&P 500 INR Terms).
- NIFTY 50 gave a return of 229% in a span 11+ years.
- S&P 500 gave a return of 306% in the same period.
- S&P 500 in INR terms gave a return of 535% in the same period.
This happened because of USD and INR forex fluctuations. Look at the graph below which shows that INR has lost its value when compared to USD in last decade.
To make it clear, let’s take a hypothetical situation.
- Let’s say you invested Rs 100 in a US stock at a time when Rs 100 was equal to $ 2.
- Assume, you get a 100% return in 5 yrs on your investment. Your investment in USD was $ 2. It has now grown to $ 4 after 5 yrs.
- Assume that INR has lost its value against USD in 5 year and now Rs 100 is equal to just $ 1.
- The value of your investment has grown to $ 4 after 5 years in USD terms. In INR terms, it is Rs 400. Hence, your effective Profit over your investment in INR terms is 300%, even though its 100% in USD terms.
Hence, global investing through ETFs could provide significant higher returns in last decade as it gives benefit of forex movements.
Few global ETFs available on Indian Stock Exchanges are:
1. Motilal Oswal NASDAQ 100 Exchange Traded Fund (Symbol: N100)
This ETF is designed to track the returns of NASDAQ 100 index, the index representing top 100 companies of US. Top 10 holdings are listed below:
2. Mirae Asset NYSE FANG+ ETF (Symbol: MAFANG)
This ETF is designed to track the returns of NYSE FANG+ index, which is an equal-dollar weighted Index designed to represent a segment of the technology and consumer discretionary sectors consisting of 10 highly-traded growth stocks of technology and tech-enabled companies.
3. Nippon India ETF Hang Seng BeES (Symbol: HNGSNGBEES)
This ETF is designed to track the Hang Seng index, the index representing the largest companies of Hong Kong. Top 10 holdings are listed below:
How can I invest in global ETFs?
You will need a demat account to invest into ETFs. You can invest using Niyo Money Stocks & ETFs feature once your demat account is active.
Disclaimer: This is not a recommendation. The purpose is solely educational in nature.
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