A Guide To Uti Index Fund Investment

The UTI Nifty 50 Index Fund is a mutual fund scheme from UTI Mutual Fund that seeks to invest in stocks of companies comprising the Nifty 50 Index and aims to achieve returns equivalent to the Nifty 50 Index through passive investment. The fund has been in existence for over a decade and offers both growth and dividend options. It has a minimum SIP amount of ₹500 and a minimum lump sum investment of ₹1,000. The expense ratio for the direct plan is 0.19%, while the regular plan has a higher expense ratio due to the commission paid to brokers/distributors. The fund has a very high risk rating according to SEBI's Riskometer and primarily invests in large-cap stocks, making it suitable for conservative equity investors.

Investment options: regular vs direct plans

When it comes to investing in UTI index funds, there are two main options: regular plans and direct plans. Both types of plans are similar in that they offer the same underlying investment, which is the UTI Nifty 50 Index Fund. This fund seeks to replicate the performance of the Nifty 50 Index by investing in the stocks of companies that comprise this index. The main difference between regular and direct plans lies in the way they are purchased and their associated costs.

Regular plans are purchased through intermediaries such as distributors or agents, who charge a commission for their services. This commission is built into the expense ratio of the fund, resulting in a higher expense ratio compared to direct plans. The expense ratio represents the fund's total expenses relative to its assets under management (AUM). As a result, regular plans may lead to slightly lower returns for investors due to the higher fees involved. However, some investors may prefer regular plans as they offer the convenience of advisory services and a middleman to handle the investment process.

On the other hand, direct plans are purchased directly from the Asset Management Company (AMC) without the involvement of any intermediaries. By eliminating the middleman, direct plans have lower expense ratios since there are no commission fees involved. This results in higher returns for investors over time. Direct plans are suitable for individuals who are comfortable making their own investment decisions and do not require the services of a financial advisor. It is important to note that with direct plans, investors are fully in control of their investments and are responsible for doing their own research and due diligence.

In summary, the main distinction between regular and direct plans of UTI index funds lies in the involvement of intermediaries and the associated expense ratios. Regular plans are purchased through distributors or agents and have higher expense ratios due to the built-in commission fees. On the other hand, direct plans are purchased directly from the AMC, have lower expense ratios, and offer higher returns. The choice between regular and direct plans depends on an investor's preference for advisory services and their level of comfort in making their own investment decisions.

Returns and rankings

The UTI Nifty 50 Index Fund has delivered average annual returns of 13.87% since its inception about 11 years ago. The fund has doubled the money invested in it every four years. Its one-year returns are 27.76%. The fund's ability to deliver returns consistently is in line with most funds in its category, and its ability to control losses in a falling market is average.

The fund has a lower expense ratio of 0.19%, which is close to what most other Large Cap Index funds charge. Its portfolio is largely conservative, with most of its holdings in Large Cap stocks and in debt instruments. The fund has generated only 12.09% annual return in 70% of the times for investors holding for at least five years.

The UTI Nifty 50 Index Fund has been a Category Leader on the Fund Size metric. Its performance on a Downside Protection Measure metric has been Satisfactory. The fund compares better than its peers in most aspects. It has generated returns of 12.321% over a period of 24 years.

The fund has a minimum SIP amount of ₹1,000 and a minimum lumpsum investment of ₹5,000. It is meant for investors with a minimum investment horizon of 5-7 years. The fund is benchmarked to NIFTY 50 Total Return Index.

The UTI Nifty 50 Index Fund is rated as a 4 fund in Equity and delivered 27.925% returns in the last year. It has a very high risk rating as per SEBI's Riskometer.

Expense ratio and exit load

The UTI Nifty 50 Index Fund has an expense ratio of 0.19% or 0.25% depending on the source. The expense ratio is a percentage of the fund's assets used for administrative, management, advertising, and other expenses. This is a fee payable to a mutual fund house for managing your investments.

The fund has no exit load. However, if you redeem within one year, returns are taxed at 20%. If you redeem after one year, returns exceeding Rs 1.25 lakh in a financial year are taxed at 12.5%.

Risk and volatility

When investing in the UTI Nifty 50 Index Fund, it is important to consider the associated risks and volatility. This fund is considered a very high-risk investment, and investors should be aware of the potential for negative returns.

The UTI Nifty 50 Index Fund is an equity fund, which means it is prone to the volatility of the stock market. The fund's performance is measured against the Nifty 50 Total Return Index, and it aims to achieve returns equivalent to this index through passive investment. One of the key risks of investing in this fund is the potential for negative returns. While the fund has delivered average annual returns of 13.87% since its inception in 2013, there is no guarantee that this trend will continue. The fund's returns can be volatile, and it has underperformed the benchmark in the past.

To evaluate the risk and volatility of the UTI Nifty 50 Index Fund, investors can consider various risk and return ratios. One such ratio is the standard deviation, which measures the volatility of a fund's returns. A higher standard deviation indicates riskier investments. The UTI Nifty 50 Index Fund has a standard deviation of 12.19, which is higher than the category average of 9.01, suggesting that the fund's performance has been more volatile than its peers.

Another ratio to consider is the Sharpe ratio, which evaluates a fund's return relative to its risk. A higher Sharpe ratio indicates better risk-adjusted performance. The UTI Nifty 50 Index Fund has a Sharpe ratio of 0.72, which is lower than the category average of 3.83. This suggests that the fund has delivered poorer risk-adjusted returns compared to other funds in its category.

Additionally, the fund's beta value is 0.97, indicating that it is more sensitive to market ups and downs. A beta value over 1 means that the fund is more volatile than the market. This further emphasizes the potential for volatility in the UTI Nifty 50 Index Fund's returns.

In terms of portfolio allocation, the UTI Nifty 50 Index Fund invests primarily in the Financial, Energy, Technology, Consumer Staples, and Automobile sectors. It has a lower exposure to the Financial and Energy sectors compared to other funds in its category. The fund's top holdings include stocks such as HDFC Bank Ltd., Reliance Industries Ltd., and ICICI Bank Ltd.

It is important to note that the UTI Nifty 50 Index Fund does not charge an exit load, and it has an expense ratio of 0.19%, which is close to the average for Large Cap Index funds. However, investors should carefully consider their risk tolerance and investment horizon before investing in this fund, as it may not be suitable for those with a low-risk appetite or a short-term investment horizon.

How to invest

The UTI Nifty 50 Index Fund is a mutual fund scheme from UTI Mutual Fund that has been in existence since 2000 or 2002 (sources vary). The fund has an expense ratio of 0.19% and has delivered average annual returns of 13.87% since its inception. The fund has an asset under management (AUM) of ₹20,432 crores as of 30/09/2024.

To invest in the UTI Nifty 50 Index Fund, you can follow these steps:

• Directly through the UTI Mutual Fund website: Visit the UTI Mutual Fund website and purchase the UTI Nifty 50 Index Fund - Regular Plan fund.
• Through platforms: Invest through platforms such as MF Central, MF Utility, or ET Money. ET Money offers a paperless investment process where you can enter your email, choose between a one-time investment or starting a Systematic Investment Plan (SIP), add the amount, provide your bank details, and confirm.
• Through a distributor: If you are not comfortable investing online, you can seek help from a mutual fund distributor, including most banks.

The minimum SIP amount for the UTI Nifty 50 Index Fund is ₹500, and you can increase this in multiples of ₹100. The minimum lump sum investment is ₹5,000. The fund is suitable for investors with a minimum investment horizon of 5-7 years.

It is important to note that UTI Nifty 50 Index Fund is a large-cap fund, and you must be prepared for potential ups and downs in your investment value. This fund is not suitable if you need to redeem your investment in less than five years.

Frequently asked questions