For investors of index funds, right here is yet another chance to invest only in the index stocks but with a distinction. Aditya Birla Sun Life AMC has launched Aditya Birla Sun Life Nifty 50 Equal Weight Index Fund, an open-ended scheme tracking the Nifty 50 Equal-Weight TR Index. The NFO opened on May 19, 2021, and will close on June 2, 2021.
The Nifty 50 Equal Weight Index Fund is unique from a standard index fund. It is mainly because the Nifty50 Equal Weight Index represents an option weighting method to its marketplace capitalization-based parent index, the Nifty50 50 Index. The index involves the very same organizations as its parent index, nevertheless, weighted equally.
All constituents of the Nifty 50 Index are element of the Nifty 50 Equal Weight index. But, as opposed to Nifty 50 which is based on marketplace capitalization and greater the marketplace cap of a business greater the weightage of the stock in the index, the equal-weight index treats all of them equally irrespective of their relative marketplace cap.
The index keeps the allocation of the constituent organizations at almost 2 % every single.
The positive aspects of an equal-weight index fund are as follows:
- There is a broader sectoral representation and more diversification at a stock level.
- The concentration threat is decreased substantially at an person stock and general sector level.
- The index is automatically re-constituted each 6 months in line with the Nifty 50, permitting for a organic choice of prime movers.
- Automatic profit booking: Additionally, the portfolio is rebalanced on a quarterly basis, major to clever and periodic profit booking. The way it functions is, considering the fact that every single stock is to have a 2% allocation, if any stock’s allocation increases as a outcome of marketplace action then on the rebalancing date, the excess percentage of the stock will be sold major to an automatic profit booking. The proceeds will be re-invested into stocks that have fallen and have much less than 2 per cent allocation.
Commenting on the launch of the new fund, A. Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC Limited mentioned, “Equal allocation to the 50 large-cap companies can benefit from growth opportunities across the board rather than relying on the performance of few heavyweights. With a period of broad-based economic recovery on the anvil, high growth sectors like cement and cement products, pharma, metals and services, are better represented in the Nifty 50 Equal Weight Index. Over time, as markets and the economy grow, we expect the Equal Weight (EW) Index to do better than Nifty 50. It has outperformed the Nifty 50 over short and long-term periods. Infact some of the stock level polarisations in the base index that we saw in 2018-19 is already reversing sharply. In this backdrop, Aditya Birla Sun Life Nifty 50 Equal Weight Index Fund is an intelligent and simple investment option that provides an opportunity to capitalize on broad-based economic growth in the country”.
Such equal weight index funds suit these investors who are searching to cut down the threat of active stock choice by way of investment in a passive investment method for ambitions that are at least 5 years away.