How to invest in the NIFTY 50 Index
In that case, India’s NIFTY 50 Index could be a great opportunity. There are many different ways to invest in the NIFTY 50 Index, so keep reading and we’ll take you through each available method to help you figure out how best to invest your money.
Where can I buy into the NIFTY 50 Index?
What is the NIFTY 50 Index?
The NIFTY 50 (short for National Index Fifty) is India’s benchmark stock market index. The NIFTY 50 consists of 50 blue-chip Indian stocks, representing 13 different sectors within the Indian economy, including finance, automakers, pharmaceuticals, metals, and technology.
Is it a good investment?
That’s up to you, but it definitely can be. India was ranked among the worldwide leaders in national GDP growth before the COVID-19 pandemic hit in 2020, so a post-COVID landscape could send the NIFTY 50 off to the races again. Just remember that as with any stock market index, you’re much better off investing in the NIFTY 50 is looking set to rise in a bull market, as in bear market conditions all indices tend to see losses across the board. Learn more about bull and bear markets in our stock investment courses.
How do I invest in the NIFTY 50 Index?
Here are three steps you should follow when investing in the NIFTY 50 Index. We’ve outlined each in more detail below.
- Choose an investment type
- Use our top tips to succeed
- Choose a platform to invest with
1. Choose investment type
The investment type you choose will depend on multiple factors, such as how much each approach will cost you in transaction fees, and how much investment advice you feel you need to succeed. The following is a rundown of some of the top methods that you can use to invest in the NIFTY 50 Index:
An ETF (exchange-traded fund) is an investment fund that you can also trade on a stock exchange during regular stock market hours, the same way individual stocks are. ETFs typically consist of a collection of assets such as bonds or commodities, but can also be structured to include all the stocks listed in the NIFTY 50 Index, therefore enabling you to make an investment that tracks the index’s level. A NIFTY 50 Index ETF gives you access to a large, diversified batch of stocks, and you get that privilege without having to pay high transaction or management fees.
If you want to focus on the NIFTY 50 Index’s top-performing stocks, you can buy each stock in the index in the separate trades. This allows you to evaluate each stock, then sell to reduce your holdings until you own only the NIFTY 50’s top-performing stocks.
The problem with this approach is that you’ll run up a lot of transaction fees making 50 separate trades to buy stocks, followed by even more costs when you want to sell. So unless you’re both very wealthy and have tons of time to kill, this approach likely won’t work for you.
By definition, a mutual fund is an investment fund that’s run by a professional money manager. You can invest in a NIFTY 50 fund fund through a broker, or through the company that administers the NIFTY 50 fund. The money manager pools capital from many different investors, then invests it into different assets. A NIFTY 50 fund (also known as a NIFTY 50 index fund) allows you to invest in all of the NIFTY 50 Index’s stocks at once.
The first drawback to a mutual fund is that you can only buy into one at the end of the stock market’s trading day, not during regular market trading hours. With the NIFTY 50 ETF, on the other hand, you can buy and sell at any point during trading hours. Another setback is that the NIFTY 50 fund (and mutual funds in general) charge higher fees than ETFs do. So if you’re going to invest in a NIFTY 50 Index fund, it likely only makes sense to do so if you plan to buy NIFTY 50 stocks and hold for a long time, since a mutual fund is more difficult and more expensive to trade than an ETF.
2. Use our top tips to be a successful investor
Before you invest in the NIFTY 50 Index, check out our top investment tips:
- Do your research. Becoming a successful investor takes time, patience, and hard work. Study the NIFTY 50 Index’s recent and historical performance, and how it stacks up against other investments. After that, decide what your investment goals are in terms of gains, as well as how much you’re willing to lose. The more prepared you are, the better equipped you’ll be to cope with volatile market conditions.
- Set a budget. The investing budget you set should take into consideration your risk tolerance, as well as how much money you can afford to lose. Don’t let small losses turn into big losses, or else you could hurt both your confidence and your ability to afford future trades.
- Select the right platform. The right investing platform to choose will depend on your needs. If you’re interested in getting the lowest transaction fees, that’s a very different approach than holding out for top-notch investment advice. In the former scenario, a broker is your best option, and a financial advisor is best suited to the latter. This means it’s imperative that you figure out your specific investment goals before you look for a platform to handle your investments.
- Grow your investments gradually. If you’re a beginner investor, start slowly by investing just a small amount of money at first. As you start to gain experience and find success, you can get more aggressive with your investment methods over time.
- Think long-term. If you’re trying to land the biggest possible gains, buying and holding the NIFTY 50 Index long-term can be a great way to go. If you’re going to try this strategy, though, make sure to do it during bull markets and not bear markets, because bear markets can eat up your capital in a hurry.
3. Choose a platform to invest with
Here’s a rundown of some of the most popular options that investors use to invest in the NIFTY 50 Index:
- Stockbrokers & NIFTY 50 trading platforms. If you want to invest in the NIFTY 50 quickly and inexpensively, online stock brokers offer easy-to-use tools that make the process seamless. However, these brokers don’t offer much in the way of in-depth investment advice. So if you’re a new investor primarily focused on finding high-level investment guidance, you could consider other options.
- Robo advisors. Robo advisors execute trades using algorithms, so transaction costs aren’t terribly high. Despite their automated trade execution function, some robo advisors will still allow you to discuss your investment strategy with a human being. Still, robot advisors don’t offer as much investment guidance as a top financial advisor does.
- Financial advisors. Financial advisors offer the highest level of investment advice. They’ll review your financial goals, go through different investment options, and help you meet your goals well after you’ve made your initial investment. Financial advisors charge more for their services than what you’ll pay with other investment methods, as their expert advice isn’t just given away. That extra cost can sometimes be worth it given the high level of customer service that financial advisors provide, but when you consider that investing in the NIFTY 50 Index is pretty simple, using a financial advisor is generally not necessary unless you’re planning other investments as well.
- Banks. Investing in the NIFTY 50 Index with your bank gives you the convenience of storing all your financial ventures (such as your checking and savings accounts, your mortgage, and your investments) with one institution. The problem is that banks usually charge high fees without providing the level of service that top financial advisors offer. So unless convenience is your top priority, you should look elsewhere.
Ready? Here’s our top recommended broker
What should I do now?
Log into your online broker’s website, decide whether you want to buy an ETF, a mutual fund, or every individual stock in the NIFTY 50 Index in separate trades, then click buy. You should still keep a close eye on your investment after that, as market conditions can shift dramatically and you want to be able to react to events to ensure the safety of your capital and profits.
Try some of our investment courses for beginners
Not feeling ready to invest yet? That’s ok. You can ramp up your investing skills by reading the easy-to-follow educational investing courses and news updates that are offered right here on this site.