Common Financial Terms & Concepts

What is Nifty BeES? Meaning and Advantages

BeES or “Benchmark Exchange Traded Scheme” is a type of fund that tracks a benchmark Index and provides returns accordingly. BeES falls under the category of an ETF (Exchange Traded Fund) as it is listed on Stock Exchange. In fact, Nippon India Nifty BeES was the first ETF to get listed on the stock exchanges. It was launched in January 2002.

BeES denotes "Benchmark Traded Exchange Scheme", which is an investment tool that tracks an underlying security as the benchmark. The Nifty BeES ETF has the Nifty50 as its benchmark. This fund invests in the Nifty 50 stocks hence the investors get invested into all the Nifty50 stocks proportionately. This leads to better diversification and asset allocation as compared to investing in individual stocks. Know the many advantages of investing in Nifty Bees. Let's get deeper into it.

What are Nifty BeES?

Nifty BeES is a type of the Benchmark Exchange Traded Scheme where the benchmark is taken as the Nifty and an ETF is created (Nifty BeES) that tracks the underlying benchmark index, which is the Nifty50 in this case.

Cost of Nifty BeES

Generally, the value of one unit of Nifty is assumed to be the current value of Nifty. If Nifty is trading at 14700 then the value of Nifty is Rs 14700. if an individual wants to buy the Nifty he can go Long on Nifty Futures which will require more than 1 lakh as the margin money hence the cheapest option to buy such Index is through an ETF.

Nifty NeES is an ideal ETF for an investor who wants to buy into the Nifty50 as a whole. To buy 1 unit of Nifty BeES one will have to pay Rs 157 as of today. This price keeps on changing with the change in the price of Nifty. But the value on Nifty BeES is always around 1/95 to 1/99 of the Nifty depending on the market conditions. The price of Nifty BeES can be traded at a premium or discount depending on the current Market Mood.

Some other costs that are indirectly paid by investors are the Expense ratio which is the Fee taken by the fund house for providing their service at managing the Fund. The expense ratio of this fund is 0.05% and the AUM (Asset Under Management) is 3323.67 crore which is one of the highest in its segment.

Advantages of Nifty BeES

Investing in BeES is similar to investing in ETFs as BeES is a type of ETF (Exchange Traded Funds). Nifty BeES also provides all the benefits of investing in an ETF. Let's look at some of the benefits,

1. Low cost

ETFs are low-cost Funds that charge a very nominal Fee or Expense Ratio as compared to Mutual Funds. The Expense ratio of Nifty BeES is just 0.05% hence it is very cheap compared to some of the other Index ETFs or Index Mutual Funds.

2. Diversification

Nifty BeES provides diversification to its investors as the ETF gives exposure to all the 50 stocks in the Nifty. Investing in this ETF is equivalent to buying all the 50 companies of the Nifty 50. The risk is proportionately spread across sectors and stocks. This will result in a well-diversified and balanced portfolio.

3. Highly Liquid

Nifty BeES is an ETF which means that it is listed on the stock exchanges (NSE & BSE). The liquidity is very high as the AUM (Asset Under Management) is more than 3000 Crores. Therefore one will not have to worry about their large orders not getting executing at their desired price. Also, another benefit that one can enjoy is to choose their own price at the time of investment. The facility of placing a Limit order is present that is not available in Mutual Funds.

4. Standardized and Transparent

Nifty BeES is an ETF that tracks the Nifty Index as the benchmark. Due to this, all the current Nifty 50 stocks will have to be present in the Nifty BeES ETF at all times. This gives the surety to investors that the Fund will not alter the proportion of this fund at any point in time. One can stay assured that they will always be invested in the Nifty50 Index.

5. No Lock-in or Exit Load

Like mutual funds, ETFs do not have a Lock-in period or exit load. Exit load is a type of penalty charged in terms of the percentage of the total value withdrawn before a certain period of time. This time span can range from 7 days to 2 years depending on the Fund. BeES give the investor the freedom to buy and sell the securities without any Exit Load. One can sell their holding the next day if they want to without paying any extra penalties.

Nifty BeES -Is it a good investment alternative?

To conclude BeES are a good option for investors who want to get exposure in the Nifty directly. Investing in Nifty BeES is a good option to diversify into all the Nifty50 companies. In this way, one does not have to actually buy all the companies individually to get exposure in Nifty.

Ask your questions here

Gold BeES is a type of BeES (Benchmark Exchange Traded Securities). It is a type of ETF (Exchange Traded Fund) that's listed on the stock exchanges. This category of funds has a benchmark, in this scenario "Gold" which it tracks and follows. Gold BeEs has its underlying as Gold and the performance of the fund purely relies on the movement of Gold. Find out the advantages and features of Gold BeES.