Navigating the Best Nasdaq Index Fund Options in India
India currently does not have a local Nasdaq 100 Index Fund available. However, investors have a few options to consider when seeking to invest in the Nasdaq 100 Index. Two prominent choices include the Motilal Oswal Nasdaq 100 FoF Fund of Fund and the Motilal Oswal Nasdaq ETF. This article will explore the pros and cons of these options to help you make an informed decision.
Understanding the Options
Motilal Oswal Nasdaq 100 FoF Fund of Fund
The Motilal Oswal Nasdaq 100 FoF Fund of Fund is an investment in a fund of funds. This type of fund invests in multiple Nasdaq 100 Index funds. While the FoF invests in US Nasdaq 100 Index funds, it also incurs its own expense ratio on top of the expense ratios of the underlying funds. To make an informed decision, it’s crucial to review the fund’s fact sheet and compare its historical returns with the Motilal Oswal Nasdaq ETF or other similar funds or with your own investment expectations.
Another critical point to consider is the potential impact on the service if the US Nasdaq 100 Index Fund managed by an Asset Management Company (AMC) closes down. The money will ultimately come back, but there might be some disruption in service. This concern was discussed in a video by the top official of Motilal Oswal, who highlighted the advantages of their direct investment in the SP 500 Index via their Motilal Oswal SP 500 Index Fund, which avoids this issue due to its direct investment in US stocks. He also mentioned that in the past, some US Nasdaq 100 Index funds faced interruptions due to AMC closures, which adds to the service risk.
Motilal Oswal Nasdaq ETF
The Motilal Oswal Nasdaq ETF offers a different investment structure. ETF (Exchange-Traded Fund) options can be beneficial, especially for short-term traders. However, one potential drawback is that if the ETF has a smaller Asset Under Management (AUM) and is not very popular, you may experience delays selling the ETF or receive a lower price than the Net Asset Value (NAV).
Investors must have a Demat account to trade in ETFs, as they are traded on the stock market like shares. One significant advantage of ETFs over Mutual Funds is that ETFs provide real-time trading prices. In Mutual Funds, the NAV (Net Asset Value) is calculated at the end of the day. Therefore, if you place an order after 1 PM, you will receive the NAV of the next day, and you cannot guarantee what the market will do in the meantime. For long-term investments, this may not be a significant issue. However, for traders looking to capitalize on sudden market dips or seeking immediate updates on the market, real-time trading prices with ETFs can be advantageous.
Conclusion
The decision on the best Nasdaq Index Fund ultimately depends on your investment goals and risk tolerance. Consideration of both the FoF and the ETF, along with a review of their respective fee structures, performance, and potential risks, will help you make a decision that aligns with your investment journey.
While India awaits the launch of a local Nasdaq 100 Index Fund, these options provide a doorway to participate in the robust US technology sector. Happy investing!