Full transcript of “Top 3 Index Funds to Buy & Hold Forever”. Click a timestamp to open the video at that moment. Need another video? Use the YouTube transcript generator.
0:00 In this video, we're going to look at the top three index funds that you can build your entire investment portfolio with. Now, I've personally built a portfolio of close to 4.8 CR and I'm majorly an index investor. My top three holdings are all indices. The first thing that I want to share is of course there's lot of benefits and advantages of index investing, but my real reason for index investing is because I don't care about the stock market. I don't want to know what's happening on a day-to-day basis or a week on week basis. And index funds or ETFs allow you to focus on what really matters in life, which is your health, your family, your relationships, and your skills. Because when you develop skills, you can create more income, which I feel is the biggest
0:46 metric, the most important metric to success for long-term wealth building. It's very easy to get distracted by all of these trading advice, but once you simplify and focus on the essentials, you can just build your portfolio with two or three index funds. Let's first talk about the indices. We'll then break it down to the index funds. Then we'll go into the specific funds. We'll also look at the ETF alternatives. We'll explore the differences between ETFs and index funds and how to pick your method of investment. First of all, what are the indices that are available to us? So on the screen on the left side, you can see six different indices. Um the first one is Nifty50 which is basically going to track the first 50 companies in India. The second one is Nifty next 50
1:34 which is going to track company number 51 to number 100 by market capitalization. So think of this as the biggest companies in India. If you were to list the 100 biggest companies in India, those are the Nifty50 and the NX50. If you were to then go to the top 250 companies in India, so from number 101 to number 250, then you can go in the top 500 direction. So now we're talking about company number 251 to company number 500 in India, which is the small cap 250. There's also gold and silver, which are metals that you can use to hedge against your equity portfolio. As you can see, for instance, just as an example, you see gold is down today by 1.34% while nifty50 is up today by 1.17%. There's typically this correlation
2:21 um that helps you hedge against equity if you invest in gold. So, so that's that's just six indices and we've built a entire well-rounded portfolio. Now, what this does, just having this knowledge that you could just invest in this allows you to number one be be free of what individual companies are doing on a day-to-day basis. even be free of what are the best actively managed mutual funds this year and next year because if someone says that these are the best active mutual funds in 2025 or 2024, what are you going to do the next year? Are you going to follow the new list? Because next year they're going to say no, these are the top ones. Last year we said these are the top ones but this year we've changed the picks to these. If you start following this kind of advice and every year you sell out your mutual fund units and then next
3:08 year you buy some other fund and if you keep doing this over and over again, you end up killing the compounding, killing your returns because real benefit of investing is long-term wealth creation. And the best thing about index investing is you could just track the index and still beat a lot of those actively managed mutual funds. 50. If you compare the returns of Nifty50 with let's say the top 10 actively managed mutual funds of Nifty50, you'll see they're either at par or doing worse than the index. There may be one fund that beats the index in one year does not beat the index in second year. People panic, people sell out, people pay tax, they enter the market with a different fund next year, maybe that does well. But after two years it does not do well. I have friends who used to tell me that they are investing in K, actively managed
3:56 mutual funds. Two or three years ago, there were a lot of comments on my YouTube channel. Why don't you invest in Kant? What do you think about K? No one is asking me that question anymore. Why? Because they themselves are selling out. This year they're not performing that well. You know, maybe next year they perform well, then the year after they don't. The thing is that you have so many options out there when it comes to actively managed mutual funds that you can get very, very distracted. So index funds allow you to focus on your real life which is outside of all of these charts and your holdings and your consoles. The real life is when you develop skills you can create more income. This is why for me the most important metric is how much money have I actually invested into the market which is right now as it shows close to 3.8 date because this will not change you know this will change present value
4:42 will change the unrealized P&L will change the XIR would change you know a few days ago it was 16% a few months ago it was 20 something% all of this will keep changing what will not change is this and this is what I have most control on because I free up time and energy to focus on building my skills which I can exchange for money and then I can use that money to invest into the market now if you look at my portfolio if you look at the top three holdings these are my top three Now, I'm not saying that everyone should pick these. Personal finance at the end of the day is very personal. I'm just documenting what I do with investing and feel free to make your own decisions about what you want to do. But if I had to build a simple portfolio today, maybe for 5 years, maybe for 10 years, even though my own personal journey, I'm building a portfolio that will stay with me forever and will be passed on to the next
5:28 generations. I would rather take a loan against these holdings than actually sell out and pay taxes and lose compounding. The first one is Nifty Beast. Now Nifty Beast tracks the top 50 companies. It basically tracks the Nifty50 index. NiftyBast is an ETF by Nippon India Fundhouse. Now I don't get paid from any of these fund houses. It's just the one that I've picked it. One of the oldest ETFs out there. It has high liquidity. But if you don't want to worry about liquidity, index funds are a great option. And the same thing you can buy as an index fund. So basically they are going to track the top 50 companies in India. You take the top 50 companies, you weigh them by market capitalization. So think of it like this. The biggest one will get more of your money. So
6:14 let's say you put in 100 rupees into the NiftyB.18 rupees is going to go into Reliance Industries Limited. 9.71 rupees is going to go into the HDFC Bank. And why is it that way? Because Reliance has the largest market capitalization out of those 50 companies. So it'll pull up more of the weightage. Let's take that as an example. You put in 100 rupees your 100 rupees gets distributed like so. Let's say the market capitalization is adjusted. Let's say Infosys now makes up 10% of the weightage. So now 10 rupees will go into Infosys. So it's all auto adjusted. The beautiful thing about not having an active fund manager is that you don't have to think oh the fund manager has changed or the fund manager is not performing that well. You know there's lot of reasons why you know
7:00 YouTubers will make these videos and that oh now the fund manager I'm not so happy with the fund manager. Your personal finance advisor might say that oh sir that fund manager has changed. Now the more you move out and you invest into other fund houses which pay them better commissions the more money they can make. The more people talk about active funds which is the top fund this year the more content they can make. So content creators, influencers, financial advisors, they are all motivated to make your investment journey as complicated as possible. And I've been through this myself. I've been a victim of this. You know, I've also done swing trading in the past. I've invested in active managed mutual funds through indirect plans as well through financial advisors
7:45 as well through robo advisory as well. And now I buy only direct index funds and ETFs. Okay. So um you can do an analysis of a couple of things, a couple of metrics when you look at an index, an index fund or an ETF. The first thing is the expense ratio. This is what you pay to the fund house. Now if you compare the expense ratio of any ETF or an index fund to the equivalent of an actively managed fund, you'll always be saving money when it comes to investing in the index. Why is the expense ratio lower for ETFs and index funds? Because there's no person sitting and managing the portfolio on your behalf. They don't have to pay for a person. They have just invested in creating an algorithm and then the algorithm will do the job. This is why the management style is known as
8:30 passive investing. So I'm a passive investor for the most part. So if you look at my portfolio, if you look at the top holdings, most of the weightage is being carried off uh by my ETF investments. Now what we're going to do is we're going to open ticker tape. If you look at the ticker tape page for niftybs, you can click on peers and you can see that all of the nifty50 ETFs. You look at Nepon India, you look at SBI, you look at ICICI, you look at UTI, all of them have a similar expense ratio which is around 0.02%. So the tracking error is pretty much the same. This is what's the error in tracking the index and the index is nifty50. The error is around 0.02%. Typically able to track the index. All of them are able to track the index. expense ratio 0.04. Remember that you
9:16 might be paying a little bit more if you go for the index fund equivalent. So we're going to open that as well. So let's say if you go with um if you go with a nippon India nifty50 index nifty50 plan right we are looking at the expense ratio here of um 0.07%. So you're paying slightly more when it comes to the index fund, but it's giving you no stress about liquidity. You know, you can automate an SIP. Of course, with some platforms, you can also automate SIPs with ETFs as well, but this is going to be a simpler way, especially if you're someone who is so far has just invested in mutual funds. You just have to pick up the index fund and you don't have to worry about liquidity. But with ETFs, you do have to see that they have
10:03 a high liquidity. Now, I've seen a lot of people overstress about liquidity. you know they invest 1 lakh rupees or 50,000 rupees and they are talking about liquidity all the time if you see my personal holding in some of these it's around 60 lakh 70 lakhs but if you feel that liquidity is a concern then definitely go for the index fund so that highlights the difference between the ETF and the index fund now the next thing we're going to look at is the nifty next 50 so let's click on the nifty next 50 index this is the index and then you can see all the ETFs that are tracking this index right So you have the Nepon India ETF Nifty50 which is called Junior Beast. Next 50 is the one by Mai asset. Okay. So the tracking error is little bit higher than the Junior Beast. The expense ratio is much
10:48 lower. So it's 0.05%. When you look at liquidity as a metric, you won't see a number. You'll see high, medium or low. So for example, Motila Rosal, this is probably because it's a new one. They don't have a tracking error for their next 50 ETF and the liquidity is low. But over time I feel more and more investors and just basically smart people are going to move to index investing and liquidity of these will also slowly become high but just stick to the ones with high liquidity. So we've discussed Nifty50, we've discussed NEX50. Now we're going to go to Nifty Midcap 150. Right? So the best way that you can do this like I'm doing it right now is to go to ticker tape. Just select the name of the index itself and then see all the ETFs that are tracking that index and then find the equivalent index
11:35 fund of the ETF. So now we're looking at the ETFs which are tracking uh which are tracking the midcap 150 index. So you see nippon mid 150bs. If you look at my uh my portfolio, mid50 piece is the one that I've chosen. It has expense ratio slightly higher than a lot of those 0.21% and a tracking error of 10%. If I had to pick again, I would do the MAI midcap ETF. So expense ratio is much lower at 0.05%. The tracking error is around 0.05%. Now I'm touching upon these different metrics and giving you different names and the main reason is honestly it doesn't matter. All of these are comparable and hence I'm not saying that one is rarely better than the other. I know that ICICI Mapon India will make me comfortable. They make me comfortable.
12:21 The most important mindset that I have is I should be able to sleep well at night. I should be comfortable with my holdings and hence in my case I've just gone with this. So we've discussed these three and we've seen a a few names of fund houses typically nippon, ICICI, mid asset. They have decent options but like I said don't worry which option you pick. If you find the equivalent u index version of let's say midcap 15 you'll see that what you're getting with an index fund is SIP. That's the first thing that okay I'm going to do this SIP and it's just going to keep continuing for me. I don't have to look at my portfolio. I don't have to open Kite and I don't even use Kite. Let's say you use mutual funds or you you may even want to go to Nepon India directly and say hey Nepon India I want to do an
13:08 SIP in your midcap 150 index fund let's say for example. So you just say invest now you start investing you log in and you forget about it. This is honestly the best approach that you could take. Click on invest now. You buy the fund. It's a direct plan and you can just forget about your holdings. If you are going the ETF route for whatever reason, then you do have to look into liquidity a little bit and you will have the option to you know buy and sell in real time which I don't really recommend because the whole point of index investing is to just keep your portfolio as the least important thing in your life and let it compound. If you haven't watched the video on my channel, do watch the video of why net worth explodes after 1 cr. That will give you insight about compounding. So, we've discussed the top three index funds that
13:53 you can hold and I've actually made this into a watch list for my mom because my mom was asking me, you know, I have this much amount if I just wanted to invest in three for her. I've chosen these because she has some sort of a comfort level with Motila Roswell and ICI. So I'm picking ICICI credential nifty50 index fund. ICICI credential nifty next 50 index fund and Modila Rosan Nifty Midcap 150 index fund for my mother. And I even feel that even more than tracking error and expense ratio if you're comfortable with something you are more likely to hold on it for a long period of time. And the winners in this game are only going to be the people who will hold their portfolio for a long period of time. And I personally believe the people who don't have to think about their portfolio when they sleep and instead they can focus on diversifying
14:39 their revenue streams create new businesses maybe take up some freelancing clients so that they can improve this metric and make that as the focus metric which is the amount that you invest in the market. So I hope this video was useful and if you want more such videos do subscribe to this channel and turn on notifications. I make a lot of videos about index investing, but not just that, you can find some of the videos about my revenue streams to get more insight of how I make this money, which I think is the most important thing that matters. So, let your investments compound and they will only compound when you leave them alone. Thank you so much for watching. I'll see you in the next one.
