InvestorQ : What is your view on NV20 ETF and its better than a large-cap fund?
Diya Chitale made post

What is your view on NV20 ETF and its better than a large-cap fund?

Ask IIFL answered.
1 year ago
An NV20 ETF looks to generate returns by closely corresponding to the returns generated by the Nifty 50 Value 20 Index. This index comprises the 20 most liquid value companies from the Nifty 50 universe. Thus it is focused on a set of companies out of the Nifty 50 index.

It is true that most of the actively managed large-cap funds have not been able to outperform the benchmark index, but they are still relevant in the Indian context as equity investing in India has a very long way to go from here. However, a combination of active and passive (ETFs / Index Funds) is a more relevant strategy for long-term investing in equity mutual funds.

As far as the NV20 ETF is concerned there are certain very important aspects to note:

·Unlike a normal large-cap fund, an NV 20 ETF is concentrated into 20 stocks only and therefore even higher risk than a large-cap fund

·Since this a relatively newer theme and offered by very few AMCs, liquidity could be issued at times of steep volatilities in the equity markets

·A large-cap fund would be more diversified and will enjoy high levels of liquidity at any point in time