How to Invest In Nifty 50 (Index Funds & ETF)

In the last 25 years, the Nifty has given an average annual return of 12.2%, which is higher than any fixed deposit/savings scheme.

How to Invest In Nifty Index Funds

Investment is the key to wealth creation and if you have the right knowledge, strategies, and courage to do things then you can be a Millionaire or Billionaire in the next few decades.

So is it easy to earn money from the stock market?

Definitely Not! But what if I tell you the easiest & popular way to invest in the stock market and get stable returns.

The answer is Nifty 50, In this article, you will learn -

What is Nifty 50?

National Stock Exchange Fifty (Nifty) is the Index of the top 50 Indian large-cap companies which is listed on NSE (National Stock Exchange) and reflecting the weighted average value of these stocks.

The Nifty index holds more than 65% market capitalization of the stock market with 13 different sectors & market leaders. That means if nifty goes up the entire stock market goes up and the nifty falls then the market does the same.

Nifty 50 started in 1996 with a base value of 1000. In the index, companies are ranked on their market cap, which means high market cap = high weightage, for that reason, you can call nifty a mirror of the Indian economy.

Why Invest In Nifty 50 Index?

Equity has always performed better than Fixed Return Securities like FDs. Many people think that index funds are the simplest way to invest in equity. I tell you why nifty can be the best option for your long term investment -

#1 Low Risky 

Let's assume you invest ₹10,000 in nifty 50 by index funds. All your money distributed in index stocks based on their weight. In this situation, there are many possibilities that some stocks fall and some stocks go up but in such a way it balances the portfolio amount to reduce the risk.

#2 Clarity of Investment

In investing, it's complicated to select an individual stock as it requires expertise and experience of the market. But if you go with nifty index funds or ETF's then there is no pressure or obstacles to your investment purpose because you know where is your money going.

#3 Good Return

In the last 25 years, the Nifty has given an average annual return of 12.2% with a return to risk ratio of 0.49. It's more than any fixed deposit or savings scheme, you can check the annual return in the below.

Nifty 50 Annual Chart (1991-2021)

Here is the annual return of Nifty 50

Year
Return
1996
−1.0%
1997
20.1%
1998
−18.1%
1999
67.4%
2000
−14.65%
2001
−16.18%
2002
3.25%
2003
71.90%
2004
10.68%
2005
36.34%
2006
39.83%
2007
54.77%
2008
−51.79%
2009
75.76%
2010
17.95%
2011
−24.62%
2012
27.70%
2013
6.76%
2014
31.39%
2015
−4.06%
2016
3.01%
2017
28.65%
2018
3.15%
2019
12.02%
2020
14.17%

Easy Way to Invest in Nifty 50!

 Open Demat

How to Invest In Nifty 50?

Nifty 50 is an index not a stock, for that reason you can't directly invest in nifty, but there are other ways, like -

  1.  Nifty Futures 
  2. Nifty Options
  3. Index Fund
  4. Exchange Trade Funds (ETF)

The first two is totally different concept or not available for long term investors, but you can buy Nifty through Index Fund and ETF's.

What is Nifty Index Funds

The nifty index funds are very similar to mutual funds. In mutual funds, a professional management team handles huge money and creates a portfolio of stocks, based on their research and analysis. But in Index Funds, there is no management team required to selecting the stock because it's passive funs, so all money distributed among certain companies of the index as per the weightage.

Here is the example -

Suppose you buy a Nifty Index Fund of ₹50,000, now all your money separately invested in nifty 50 companies.

It means, if Nifty Index 1st ranked company (Reliance) have 10% and 2nd company (HDFC Bank) have 7% of index weightage then first ₹5000 (50,000x10%) will be put in 1st stock and next ₹3500 (50,000x7%) will be put in 2nd stock and this process will continue in the forward stocks.

How to Buy Nifty 50 Index Fund

First of all, you need to understand and identified those nifty index funds which are good for your return expectation and investment purpose after that you can follow these easy steps to buy index funds

01
Open a Demat Account

You need a Demat & Trading account, if you don't have then compare and select one of the best stock brokers for you.

02
Login In Your Trading App

Open your trading app and login via useing User ID, Password and PIN.

03
Click on the Nifty Funds Section and Search

Go to the Mutual Fund section and search the name of the index fund in which you like to invest.

04
Compare All Nifty Index Funds

Before buying any fund, please analyze & identified good suitable nifty index funds.

05
Select You Payment Mode

There is two option to choosing any index fund - first is Direct plan where you pay a lump sum amount, and second is Systematic Investment Plan.

06
Click on the Buy Button

Enter your amount of investment and click on the buy button.

07
Units Will be Credited in Your Account.

And finally, index funds units credited to your demat account shortly.

Frequently Asked Questions

What is the Nifty Index Funds?

Nifty index funds are just like passive mutual funds, the only difference is that those types of funds not required an expert team to manage the portfolio.

What is the Minimum Amount to Start Investing In Nifty?

There is no limit or minimum amount to invest, you can start with ₹500 SIP plans or even with lower.

Nifty Index Funds Vs ETF (Nifty Bees) Which is Better?

Nifty Index Funds are good for long-term stable investment and the Nifty Bees (ETF's) is best for the easily accessible day trades on flexible rates.

What is the Average Annual Return of Nifty 50?

The average annual return of the Nifty is 12.2% in the last 25 years while the highest return is 75.76% in 2009 and the biggest down is −51.79% in 2008.

Is Safe to Invest in Nifty 50?

Absolutely Yes! Because it has the top 50 Indian companies which are leading the stock market from different sectors.

What is the Nifty Bees?

Nifty Bees is an popular ETF (Exchange Traded Funds) that can easily buy and sell on the trading app during market hours.

How to Buy Nifty Bees?

Follow these steps -
1. Open Zerodha demat account.
2. Log in to your trading app.
3. Now type NiftyBees in the Watchlist.
4. Click on the first ETF.
5. Enter the quantity & click on the Buy Button.
6. ETF Units will be credited in your demat in the next few days. 

Can I Buy Nifty Though Option & Future.

Yes, You can but we not recommend it, especially if you are a beginner in the market. Because it is very risky for your capital to trade in any kind of future and option.

Best Way to Invest In Nifty Index Funds?

1. Get the basic knowledge of the Share Market.
2. Compare all type of index funds and ETF's.
3. Select one of the best Nifty Index Funds.
4. Set your suitable SIP plan for investment and
5. Click the buy button and hold it for long term.

Best Way to Invest!

 Open Demat

Conclusion of the Article

The concept of index funds is trendy in the USA, and now it is gradually spreading to other countries as well. This Post "How to Invest In Nifty 50" explained the basics of the nifty index funds, the importance of investment, and the process of buying them.

I also cover the main related points and facts but if you still have any queries or thoughts about this post then tell me in the comment box.

Important Note For Investors

This post was only for education purposes, we never advise you to invest in any stocks & index funds. All your investments are at your own risk, so don't believe in tips, build your intelligence and then go with them.

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About the Author

Hi! My name is Abhishek Vyas and I am the co-founder & senior editor of InvestoValue. I write about better investing and financial decision making to achieve financial freedom.