Investing in N100 – A Mutual Fund, an ETF, Invests in Nasdaq Top 100 Company for Indian investors
N100 is a magical ETF of US Economy for Indian Investors with a low entry barrier and can be owned by any investor in India.
Mutual Fund invests in various asset classes in Equity, debt, Gold. Within that it is further fragmented basis market cap (largecap, midcap, Smallcap) or theme wise (pharma, banking, consumption etc). The beauty is this instrument can offer various colour and flavor to your portfolio and be beneficial for various goals across time frames.
Have a quick glance at N100 on Youtube channel
MOST Shares Nasdaq 100 – One such interesting and less talked about category is funds which invests in foreign equity markets. There are a few, but we are discussing here about NASDAQ 100. One of the most tracked Indices globally, comprises of about 103 largest non-financial companies listed in NYSE. undoubtedly it is one of the most popular index of New York Stock Exchange. Motilal Oswal launched ETF Fund for retail investor in Mid march of 2011. This is a thematic fund indeed, theme is foreign equity, underlying companies are technology heavy. With an AUM about 700 crore, the fund is not a large one, if compared to Indian diversified market. This fund has given a unprecedented return since its inception year on year. An all season for Indian Investors, let us look how it move including the covid19 global lockdown.
But How to invest in MOST Shares N100? N100, trailing the NASDAQ 100 had a great run in US markets itself barring some odd quarters in the last 5 years when Indian IT sectors scrambled to pull up its face. There are a few reasons. The top 10 companies in the portfolio includes – Microsoft, Apple, Alphabet, Facebook, Intel, Cisco, Comcast, PepsiCo. Though on the surface, top 10 companies are mostly tech heavy, but the business are varied. Apple – Consumer product, Alphabet and Facebook’s majority revenue comes from marketing and consumer based apps, Pepsico again is a global leader. The players are not only big in US and India, most have them has made a prominent mark globally and has a moat, it gives them competitive advantage over other players, they are likely to stay above the crowd in various business cycles.
Apart from their strong year on year growth, there is another factor which works in favor of Indian Investors, that is depreciating rupee against Dollar. Though in dollar terms, NASDAQ 100 has given a compounding growth of 15% over 8 years, N100 has grown by 21 % CAGR in rupee term in the same years.
Who should Invest? This is a rare yet easy opportunity for Indian retail investors to own World’s most valued companies in an economic way. The ETF is available even single unit in the BSE and NSE trading platforms. Hence the minimum investment is 1 unit (As on 4th June it costs Rs. 714/ unit). An investor who has an existing portfolio in Largecap schemes can look at this as an additional avenue for wealth creation. Like any equity fund, the investment horizon should be atleast 5 years to realize the growth potential.
How to sell N100? It is as simple as selling any stock or ETF. The volume likely to be lesser than Equity, yet, it is not difficult like NCD/ Bonds. Transaction is easy.
How is N100 Taxed? This fund won’t be taxed like equity Funds in India. This will be taxed like a bond, Debt mutual Fund or Gold ETF.
What is The cost? The Fund has managed the keep the expense ratio at 0.82%, aligned with the low ETF cost structre, which also contributes to better returns for the investors.
What are the risk involved in this?
The Fund carries the risks of Equity based mutual funds
Additionally, Rupee appreciating against dollar could have a negative impact on the fund
The negative performance of NASDAQ 100 will have a direct impact, it is comparable with Indian market data
The AUM of the Funds are low, high redemption may cause high NAV fluctuation as the liquidity in the fund is very low.
N100 is a cool ETF options which makes me say that –markets don’t fail to surprise me at any point. The various thoughts of how to generate profit in dull markets, hedge risk in unprecedented situation often comes in mind, more often the thought that if retail investors can really make money? Yes that’s possible. N100 is one such mutual fund/ ETF of Motilal Oswal Fund house, not that popular in personal finance conversations, this 700 crore AUM Fund is silently taking advantage of the rupee dollar movement, investing in companies which middle class Indians can never think otherwise in their lifetimes.
‘Mutual Fund Sahi hai’ wave has overtaken any other ad campaign in past 2 years and rightly so, as it promotes a product for retail investors. The cost structure, investment amount and liquidity is commendable. But which mutual Fund is Sahi for you, for your goal is an equally important topic to ponder. Happy Investing
What is N100 ? stocks it constitutes? What is the N100 return in dollar terms?
N100 is an ETF (Exchange traded fund) by Motilal Oswal in year 2011, N100 is shadow of the NASDAQ100 index, which consists of top 100 stocks of US NASDAQ stock exchange. The fund has given a CAGR return of 12 % in 1 year, 17% in 3 years, and 15% in 5 years annualised return in N100.
The top 10 companies in the portfolio includes – Microsoft, Apple, Alphabet, Facebook, Intel, Cisco, Comcast, PepsiCo. The returns are volatile compared to Nifty based ETF, as the factors of the movement are very different like overseas stock market performance and dollar rupee movement. On the contrary, this gives us a good hedge against rfising inflation/ Gold prices.
NASDAQ Returns in dollar terms – In the period between April 2014 – April 2019, Nasdaq has given an absolute return of about 125%, a 17% CAGR. The return on rupee term was – 139% at a CAGR of 19.88.
If we look at the period between 2011 April 2011, to March 2019,
NASDAQ -100 has given a compounding growth of 15% over 8 years, while N100 has grown by 21 % CAGR.
Apart from taking the rupee dollar advantage, holding world’s most valued companies, this fund also has lowest cost structure owing to ETF standards.
Barring a few one off quarterly aberration, N100 has beaten Nifty with a wide margin in last 9 years, 5 years, 3 years, 2 years and 1 year frame.
Why it is interestingly different for Indian Investors?
In 2011 October dollar was trading at Rs. 50 – 53 , while in 2020 each dollar is worth Rs. 72-57. That means Dollar has become expensive over the years for Indian Investors. In last 5 years, Dollar has risen 3% against Indian rupee year on year.
Expense on the N100 Fund –
Like any other ETF, expense raio is very low. Very low Portfolio Turnover Ratio at 3.00%, as it mirrors Nasdaq100. Category average turnover ratio is 32.15%. Fund manager updated portfolio less frequently than peers in last 1 year. (I.e. fund manager held stocks/bonds in the portfolio for longer duration than peers)
How is N100 Taxed in India?
In India N100 is taxed like a debt fund. It has to pay taxes in accordance with STCG (below 3 years at the income tax slab) and LTCG (10% of profit ) requirement on profit as per laws.
When I wish to purchase an ETF/ Share, apart from doing my own reading and research I also buy 1 or 2 unit of the share, it helps me track the script more actively and take an informed decision.
I AM NOT A qualified investment advisor, spreading financial literacy is my passion. You should speak with your financial advisor or do your own research before making any purchase or sale.
I recommend the below mentioned book for investors at all level.
- For beginners – Let’s talk Money – a basic on personal finance by Veteran Journalist Monika Halan – https://amzn.to/2MzK5XL
- 2. Get the investor mind set with. Rich Dad Poor Dad Cash Flow Quadrant (Rich Dad Poor Dad) – Robert Kiyosaki – https://amzn.to/2AIx4Ze
- Bible for stock market investors – The Intelligent Investor by Benjamin Graham – https://amzn.to/2Mwr7kS
