S&P BSE 500 Index: Why the S&P BSE 500 ETF can be a good starting point for new investors

The year 2021 has been something of a comeback as businesses and schools have started to reopen and people have slowly but surely tried to get back to normal life. Stock markets continued their spectacular run and saw the growing participation of retail investors, as evidenced by the growth in assets under management (AUM) of mutual funds and demat accounts. However, the turn of the calendar year brought increased volatility and headwinds in the form of geopolitical risks, rising inflation, rising interest rates, and more. As a result, stock markets corrected sharply, giving further impetus to the cycle of greed and fear. Given the increased volatility, many investors are afraid to invest more in stocks and are unable to make optimal investment decisions.

Undoubtedly, investing in a volatile market is a difficult task. But the bottom line is that equities are vehicles for long-term growth, and consistent investment in equities can help generate significant long-term returns. Moreover, India remains a bright spot among developing markets and equity markets are likely to benefit from this in the long run. However, making the right investment choices is never easy and these challenges only increase in a volatile environment. A simple way to overcome this hurdle is to invest in the S&P BSE 500 Index.

Overcoming obstacles with the S&P BSE 500 ETF

A great way to invest in the S&P BSE 500 Index is to invest through exchange-traded funds or ETFs. First, let’s discuss what ETFs are and how they can improve your investment journey. An ETF is simply an investment portfolio that consists of all the securities that are part of the chosen underlying index and that too in the same proportion. Therefore, when the underlying index increases, the value of the ETF increases and vice versa. The marginal difference between the performance of the underlying index and that of the ETF is due to tracking error which can be attributed to the expenses incurred by the ETF.

Take for example the S&P BSE 500 index. An ETF that replicates this index will invest in all the components of the S&P BSE 500 index and in the same proportion. Therefore, the magnitude of gains or losses on the ETF will also be similar to that of the index. In addition, the shares of an ETF, in this case the S&P BSE 500 ETF, are listed on a stock exchange. As a result, you can easily buy and sell shares during trading hours.

Although there are several ETF options available, the S&P BSE 500 ETF may prove to be a compelling choice in the current environment. The index is fairly diversified in nature both in terms of market capitalization and sector exposure. It has a healthy mix of large, mid and small cap stocks. Investors who choose to invest in such an index can potentially generate significant long-term returns through exposure to mid- and small-cap stocks while maintaining portfolio stability through exposure to large-cap stocks. This eliminates the dilemma of investing in large, mid or small cap stocks.

The S&P BSE 500 ETF can be a great investment choice for new investors as well as seasoned investors. If you are concerned about stock market volatility, then the ETF acts as a vehicle to carefully dip your toes into the stock market. On the other hand, if you are a seasoned investor, ETFs can help improve your portfolio diversification. The fact that they are generally inexpensive, liquid and transparent adds to the appeal of ETFs.

So, if you are looking to participate in India’s growth story but are unsure when and where to invest, especially in the current market scenario, the S&P BSE 500 ETF may be a good starting point. departure.

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