NiftyBees: What They Are And How To Invest In Them

There are thousands of strategies, tips and tricks to making money in stocks, but they don’t always work out. Even professional stock managers often struggle to beat stock market indexes — 95% of fund managers can’t perform as well as a simple index if their own performance fees are taken into account. The obvious solution, thus, is to invest in a stock index itself on your own, and eliminate fund managers altogether. One way to invest in a stock market index in India is through NiftyBees.

What Are NiftyBees?

Niftybees (Nifty BeES) are an exchange-traded fund that tracks the Nifty Index. This means that NiftyBees is like a stock that can be traded on the index, much like any other stock, like Reliance or TCS. But the value of NiftyBees closely tracks the value of the Nifty — in general, the value of NiftyBees hovers around 1/10th of the Nifty. If the Nifty is at 10,000, NiftyBees will trade at around Rs. 1000 per stock. You can then buy one NiftyBees for Rs. 1000, exactly how you’d buy any other stock. If the value of the Nifty rises to 11,000, the value of NiftyBees will rise to Rs. 1,100.

Advantages of investing in NiftyBees

Niftybees offer several advantages over picking individual stocks

  1. Low risk: Individual stocks have systematic risks — for instance, the value of stocks like Kingfisher or PC Jewelers has fallen substantially from their highs. But the Nifty as a whole — which consists of 50 top companies — has never fallen very much since its inception. There are ups and downs in the Nifty, but it’s unlikely that the Nifty will fall substantially over the long term. This makes investing in NiftyBees a safer alternative than investing in individual stocks.
  2. Reasonably high returns: The Nifty has risen from 1000 odd to 12,000 levels over the last twenty years. This implies an annual rate of return of 16 percent per year. These returns are comparable to those of mutual funds, and much higher than those one can achieve with fixed deposits.

  3. Low expense ratios: Fund managers who manage mutual funds actively pick and choose stocks, and charge heavily for their services — mutual funds can have expense ratios of 2-3 percent. In comparison, managers who manage Niftybees only need to balance the fund with respect to the Nifty, which means that NiftyBees funds have lower expense ratios than mutual funds. This results in higher returns for the investor.
  4. Saves time: Picking stocks is a laborious process; what’s even harder is figuring when to buy and when to sell. Buying NiftyBees is relatively easier — all you need to do decide how much to buy. If historical trends hold out, you’ll have made a handsome return over several years.
Who should invest in NiftyBees?

NiftyBees is a good investment for long-term investors who want to invest in the stock markets, but don’t want to go through the hassle and the risk of picking individual stocks. NiftyBees can also be a good investment for those investors who want an exposure to India’s growth story — the Nifty broadly captures the growth performance of India’s top companies, and NiftyBees allow investors to capture some of that growth. NiftyBees are also a good investment option for those who invest through SIPs — it can be a good strategy to put in a fixed amount of money every month in Niftybees, and it can build up to become a substantial sum over time.

How to invest in NiftyBees?

Investing in NiftyBees is like investing in any other stock. Most brokers would give you an option to buy NiftyBees. Niftybees can be bought just like ordinary stocks at the prevailing price of NiftyBees (the price is usually around 1/10th of the value of the Nifty).

 

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