Angel One Nifty Total Market ETF vs. Index Funds: Which is Right for You?

Investors looking for passive investment options often choose between Exchange-Traded Funds (ETFs) and index funds. While both aim to track a specific index, they differ in structure, trading mechanism, and costs. The newly launched Angel One Nifty Total Market ETF provides exposure to 750 stocks across different market caps, making it one of India’s most diversified ETFs. But how does it compare to traditional index funds? This article explores the key differences, advantages, and drawbacks of each to help you make an informed decision.

Nifty Total Market ETF

Until recently, no ETF tracked the Nifty Total Market Index, which consists of 750 stocks spanning large-cap, mid-cap, small-cap, and micro-cap segments. This makes it one of India’s most diversified ETFs, covering nearly the entire listed equity market.

Angel One Mutual Fund has launched two new funds that use the Nifty Total Market TRI as their benchmark. The New Fund Offer (NFO) is available from February 10 to February 21, 2025, providing investors an opportunity to invest in a broad-market index.

• Angel One Nifty Total Market ETF
• Angel One Nifty Total Market Index Fund

Understanding Index Funds

An index fund is designed to mimic the performance of a specific market index. By investing in index mutual funds, investors gain access to a diversified portfolio that mirrors the composition of an index like the Nifty 50. A key advantage of index funds is their low-cost structure, as they generally have lower fees compared to actively managed funds. Additionally, they offer broad market exposure without requiring investors to pick individual stocks, making them a preferred option for long-term passive investing.

Differences Between ETFs and Index Funds

ETFs and index funds are 2 primary avenues of passive investing. 

Key Differences Between Index Funds and ETFs

Pros and Cons of Investing in Exchange-Traded Funds (ETFs)

Pros of Investing in ETFs

• Real-time Trading – Unlike mutual funds, ETFs can be traded anytime during market hours at prevailing prices.
• Index-based Investing – ETFs track an index (e.g., Angel One Nifty Total Market ETF invests in all Nifty Total Market stocks), ensuring diversification.
• Lower Costs – ETFs usually have lower expense ratios compared to actively managed mutual funds.
• No Fund Manager Bias – Since ETFs track an index, they eliminate the risk of poor fund manager decisions.

Cons of Investing in ETFs

• Brokerage & Other Charges – Buying and selling ETFs incur brokerage and other trading costs.
• Minimum Investment in Whole Units – ETFs can only be bought in full units, unlike mutual funds, where fractional units are allowed.
• Liquidity Issues – Some ETFs have low trading volumes, making it difficult to buy or sell large quantities.
• Price Variations – ETF prices depend on demand and supply, which may cause slight differences from NAV.

ETFs offer flexibility and transparency but may have liquidity challenges. They are best suited for long-term investors seeking equity exposure with minimal risk.

Pros and Cons of Investing in Index Funds

Index funds are a simple way to invest in the stock market by tracking a specific index. Here are the key advantages and disadvantages:

Pros of Index Funds

• Easy Diversification – One investment gives exposure to multiple stocks, reducing risk.
• Low Cost – Expense ratios are lower compared to actively managed mutual funds.
• Ideal for Beginners – Simple investment option with minimal decision-making required.
• No Fund Manager Risk – Passively managed, so fund manager decisions do not impact returns.

Cons of Index Funds

• No Outperformance – Returns are limited to how the index performs, with no chance of beating the market.
• Limited Choices – Fewer options compared to actively managed mutual funds.
• Tracking Error – The fund’s returns may slightly differ from the index due to costs and other factors.

Index funds can be a ideal choice for long-term investors who want a low-cost, hands-off investment approach.

Conclusion

Both ETFs and index funds offer passive investing benefits, but the right choice depends on your needs. Angel One Nifty Total Market ETF provides real-time trading and broader market exposure, while index funds offer ease of investing without requiring a demat account. If you prefer liquidity and flexibility, ETFs may suit you, whereas index funds are ideal for hassle-free, long-term investing.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.