A Guide To Investing In Motilal Oswal S&P 500 Index Fund

The Motilal Oswal S&P 500 Index Fund is an international index mutual fund scheme from Motilal Oswal Mutual Fund. The fund seeks investment returns that correspond to the performance of the S&P 500 Index, subject to tracking error. This fund primarily invests in the shares of foreign companies listed outside India and has a conservative investment strategy, with holdings mostly in Large Cap stocks and debt instruments. With an expense ratio of 0.62%, the fund has generated strong returns, outperforming its peers in most aspects. Investing in this fund can be done directly from the Motilal Oswal Mutual Fund website or through platforms like MF Central and MF Utility. It is important to note that mutual fund investments are subject to market risks, and investors should carefully read all scheme-related documents before proceeding.

Where to buy the fund

The Motilal Oswal S&P 500 Index Fund can be purchased directly from the Motilal Oswal Mutual Fund website. Alternatively, you can buy mutual funds through platforms like MF Central and MF Utility. If you are uncomfortable with buying mutual funds online, you can seek help from a mutual fund distributor, such as a bank.

Investment objective

The Motilal Oswal S&P 500 Index Fund seeks an investment return that corresponds to the performance of the S&P 500 Index, subject to tracking error. This means that the fund aims to replicate the returns of the S&P 500 Index as closely as possible, but there may be some discrepancies due to tracking errors.

The fund primarily invests in shares of foreign companies listed outside India, with a focus on large-cap stocks and debt instruments, following a conservative investment strategy. It is suitable for investors who are looking for long-term investment options, as the fund recommends investing for five years or more to beat inflation rates and returns from fixed-income options. However, investors should be prepared for potential ups and downs in their investment value.

The Motilal Oswal S&P 500 Index Fund is considered a very high-risk investment according to SEBI's Riskometer. It has consistently delivered returns that are better than the category average, with a return of 17.15% since its inception. The fund has also experienced significant AUM growth in the last 12 months in the International Index category.

The fund has an expense ratio of 0.55% to 0.62%, which is close to the average for other International Index funds. It has no lock-in period, and investors can redeem their investments at any time, although there is an exit load of 1% if redeemed within 7 days.

Expense ratio

The expense ratio of a mutual fund is the annual fee charged by the fund house for managing your mutual fund investments. It is the total percentage of a company's fund assets used for administrative, management, advertising, and other expenses. The Motilal Oswal S&P 500 Index Fund has different expense ratios for its Direct and Regular Plans.

The expense ratio for the Direct Plan of the Motilal Oswal S&P 500 Index Fund is 0.62%. This is considered a very low expense ratio compared to other funds in its category. The Direct Plan has no broker or distributor commissions, resulting in a lower expense ratio and higher returns for investors.

On the other hand, the Regular Plan has a higher expense ratio of 1.13% because it includes commissions paid to brokers or distributors. This means that the fund's returns are reduced by a higher percentage of fees.

It is important to note that the expense ratio is deducted from the fund's NAV on a daily basis. Therefore, if you have invested 10,000 rupees and the expense ratio is 2%, you would have paid 200 rupees in fees to invest in mutual funds.

When considering investing in mutual funds, it is essential to understand that mutual fund investments are subject to market risks. It is recommended to read all scheme-related documents carefully before investing.

Returns

Recent Returns

As of October 2024, the Motilal Oswal S&P 500 Index Fund has delivered recent returns that are higher than the category average for Equity International funds. The fund's NAV (Net Asset Value) as of October 1, 2024, was ₹21.4263, and as of October 10, 2024, it was ₹21.7277, exhibiting a slight decrease. The fund's performance has been consistent, with a rank within the category that is unavailable as of October 2024.

Historical Returns

The Motilal Oswal S&P 500 Index Fund has consistently outperformed its peers in the International Index category. As of October 2024, the fund has generated the highest returns among International Index funds over the last three months. Additionally, the fund has delivered average annual returns of 20.09% since its inception, with a total return of 52.69% as of October 5, 2024. The fund has doubled the invested money approximately every four years.

Risk and Return

The Motilal Oswal S&P 500 Index Fund offers a favourable risk-return profile. It has been ranked highly in terms of return/risk ratio, generating 20% more returns for every unit of risk taken. The fund's volatility is slightly higher compared to other funds in its category, but its risk-adjusted returns are relatively poor. The fund's beta value indicates that its performance is more volatile compared to similar funds in the market.

Comparison with Peer Funds

When compared to other funds in its category, the Motilal Oswal S&P 500 Index Fund has a lower expense ratio of 0.62%, which translates to higher returns for investors. The fund has also outperformed its peers in terms of AUM growth, expense ratio, and return/risk ratio. However, it falls behind in terms of risk-adjusted returns, with a poor Sharpe ratio.

Investment Horizon

International equity funds, including the Motilal Oswal S&P 500 Index Fund, are suitable for long-term investment horizons. It is recommended to invest in this fund only if you can remain invested for at least five years. This is because international equity funds can experience ups and downs, and a longer investment horizon allows for a smoother ride and potentially better returns.

Risk

Investing in the Motilal Oswal S&P 500 Index Fund carries a variety of risks that potential investors should be aware of. Firstly, mutual fund investments are subject to market risks, and investors are advised to carefully read all scheme-related documents. While index funds are considered relatively economical and effective for wealth creation over the long term, they are still subject to market volatility and potential negative returns.

The Motilal Oswal S&P 500 Index Fund has a "very high-risk" rating according to SEBI's Riskometer. This means that there is a significant chance of negative returns on your investment. The fund's performance is subject to tracking errors, and while it aims to replicate the performance of the S&P 500 Index, there may be deviations.

Additionally, international equity funds, such as this one, carry specific risks. It is recommended that investors only consider this fund if they are prepared to invest for five years or more. Shorter investment horizons may not be suitable for this type of fund. Furthermore, investors should ensure that the fund has a broad mandate to invest in companies of different sizes, sectors, and countries to minimize risk.

It is worth noting that the expense ratio of the Motilal Oswal S&P 500 Index Fund is relatively higher compared to its peers, which can impact overall returns. The fund's portfolio turnover ratio is also lower than the category average, indicating that the fund manager updates the portfolio less frequently than peers. This may impact the fund's ability to adapt to changing market conditions.

In conclusion, while the Motilal Oswal S&P 500 Index Fund offers an opportunity to invest in a diverse range of international companies, it carries a high level of risk. Investors should carefully consider their investment horizon, risk tolerance, and the potential impact of expenses and portfolio turnover before making any investment decisions.

Frequently asked questions