Author
LoansJagat Team
Read Time
5 Min
14 May 2025
Focus On Low-Cost Index Funds or ETFs That Track Nifty for Long-Term Growth
Mohan started investing ₹5,000 every month in a Nifty index mutual fund in January 2015. In ten years, he had invested ₹6 lakhs.
By January 2025, that amount had become ₹11.5 lakhs. Mohan did not time the market or pick stocks. He simply stuck to his plan.
If you want to grow your savings over time, you must have heard of Nifty index funds and ETFs. You do not need to do regular tracking or detailed research.
These options simply follow the Nifty 50. It includes top-performing firms from different sectors. Over the years, this approach has created good results without much stress.
In this blog, we will help you understand how these funds work.
What Are Nifty Index Funds And ETFs?
When you put money into an index fund, you're owning small parts of all the companies that make up the Nifty 50. This group consists of 50 stable and large companies.
An index fund tries to mirror the movement of this index. In short:
- Index ↑ = Your Money ↑
- Index ↓ = Your Money ↓
ETFs are a bit different. Their job is the same as an index, tracking the Nifty, but you have to buy and sell them through Demat accounts like shares.
Point | Index Fund | ETF |
Mode to buy and sell | Through AMC or app | Through a stock exchange |
Does it require a Demat? | No | Yes |
Minimum Amount | ₹500 to ₹1,000 | Cost of one unit |
Expense Ratio | 0.10% to 0.30% | 0.05% to 0.20% |
Pricing | Based on end-of-day NAV | Changes throughout the day |
How These Funds Performed Over the Years?
On average, Nifty 50 has delivered close to 11–12% returns every year over the last ten years.
Fund | 5-Year CAGR | AUM (₹ Cr) | Expense Ratio |
UTI Nifty Index Fund | 13.1% | ₹2,200 | 0.17% |
HDFC Index Fund - Nifty 50 Plan | 13.0% | ₹4,500 | 0.30% |
Nippon India Index Fund - Nifty 50 | 13.2% | ₹1,456 | 0.20% |
SBI Nifty ETF | 13.3% | ₹7,100 | 0.07% |
ICICI Prudential Nifty ETF | 13.4% | ₹5,800 | 0.05% |
You can see that simply staying with the market leaders can offer you solid returns.
Why Costs Matter More Than You Think?
The expense ratio might seem like a small number to you. But over time it impacts the amount you receive. Even a small difference of 0.2% can make a big difference in returns over 15 to 20 years.
Years | Investment | Fund A (0.10%) | Fund B (0.30%) | Difference |
10 | ₹5,00,000 | ₹9.15 lakhs | ₹8.88 lakhs | ₹27,000 less |
20 | ₹10,00,000 | ₹33 lakhs | ₹30.6 lakhs | ₹2.4 lakh less |
Over the years, low-cost funds quietly add up. And this is the reason why they are preferred by experienced investors like you.
How Does Nifty Perform Over The Long Term?
Year | Nifty 50 Index Level | Annual Return (%) |
2013 | 6,304 | - |
2015 | 7,946 | +13.3% |
2018 | 10,862 | +12.4% |
2020 | 12,169 | +5.9% |
2023 | 19,745 | +14.2% |
Lump Sum Vs SIP In Nifty Funds
Both of the options work well. However, SIP helps you in investing small amounts constantly. It also helps smooth out the impact of market ups and downs. It makes regular investment easier for salaried individuals.
Method | Total Investment | Value after 10 years (at 12% CAGR) |
Lump Sum | ₹5,00,000 | ₹15.5 lakhs |
SIP (₹5,000 per month) | ₹6,00,000 | ₹11.6 lakhs |
Why Are People Choosing Index Funds And ETFs?
- Clarity, you have a clear idea of what you are investing in.
- With lower charges, you will be able to save more over time.
- Steady Returns, these funds often beat actively managed ones such as large-cap mutual funds.
- Ease, there is no need for you to track stock news or hire an expert.
Real Example Of Consistent Investing
In early 2018, Radhika started a SIP of ₹7,000 in a Nifty index fund. She makes sure that she is investing without missing a single month. Over six years, her total investment becomes ₹5.04 lakhs.
She did not change plans or switch funds, even when the market crashed in 2020. So in 2024, the value of her investment was ₹8.15 lakhs.
Top Performing Nifty ETFs Right Now
Name of ETF | 1-Year Return | 3-Year Return | Expense Ratio |
ICICI Prudential Nifty ETF | 24.6% | 14.2% | 0.05% |
Nippon Nifty BeES | 24.4% | 14.0% | 0.07% |
UTI Nifty ETF | 24.3% | 13.8% | 0.07% |
Things To Keep In Mind
Factor | What Does It Mean? | Why Does It Matter? |
Tracking Error | Shows how well the fund moves in line with the Nifty index | Smaller error = returns match the index better |
Fund Size | Total money managed by the fund | Bigger funds offer smoother buying and selling |
Expense Ratio | Annual cost charged by the fund | Lower cost = more savings in the long run |
Holding Period | How long you stay invested | Staying 5+ years gives time for growth to build |
Final Thoughts
Check out your goals. And if you think that your goal is long-term wealth creation, then without much thought go for index funds and ETFs. They are linked to Nifty 50 and in the long run, it will prove to be a smarter choice for you.
There is no need for you to be an expert. Also, you do not need to chase trends. Simply you need to start small, stay constant, and give enough time to your investments.
The market doesn’t remain the same, it has its constant ups and downs. However, over time, growth has been shown by the quality companies in the Nifty 50. If you invest in them, then your money will also grow.
FAQs
1. Can I do monthly SIP in an ETF?
Yes, you can. But you can do it through a broker.
2. How long should I stay invested?
At least 5 to 7 years.
3. Can I stop my SIP anytime in an index fund?
Yes, you can pause or stop it whenever you want.
4. Do ETFs give dividends?
Some do, but you mostly gain by reinvesting.
About the Author
LoansJagat Team
We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?
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