Nifty Total Market Index Fund vs Direct Equity: Which Suits You?

The Nifty Total Market Index is designed to track the performance of 750 stocks across large, mid, small, and microcap segments via a single index. It includes all stocks from the Nifty 500 Index and the Nifty Microcap 250 Index, with stock weights determined by free-float market capitalisation. This broad-based index offers investors exposure to multiple sectors, making it a choice for those looking for diversified market participation.

Investors often debate between building a stock portfolio through direct equity investing or opting for a market-wide index fund like the Nifty Total Market Index Fund. Understanding the complexities of both approaches can help investors make informed decisions.

Stock Picking 

Direct equity investing involves selecting individual stocks to build a portfolio, which requires extensive research and active management. While it offers the potential for high returns, it can come with disadvantages such as:

• Stock Selection Challenges: Identifying high-performing stocks demands in-depth knowledge of financial statements, market trends, and company fundamentals.
• Sector-Specific Risks: Investing in limited sectors can expose investors to market volatility and economic downturns.
• Time and Effort: Monitoring stock movements, quarterly earnings, and economic indicators is time-consuming.

The Simplicity of Investing in the Nifty Total Market Index Fund

Investing in the Nifty Total Market Index Fund eliminates the complexity of stock selection by offering exposure to all key sectors of the Indian economy.

The Nifty Total Market Index provides diversified exposure across multiple sectors, ensuring balanced market participation. If you look at the sector distribution, Financial Services holds the largest weight at 28.55%, followed by Information Technology (10.12%), Oil, Gas & Consumable Fuels (7.39%), and Fast Moving Consumer Goods (6.94%). Other key sectors include Automobile & Auto Components (6.87%), Healthcare (6.50%), and Capital Goods (5.94%). Apart from these, there are several other sectors included as well.

By investing in the Nifty Total Market Index Fund, investors can gain access to all these sectors without the need to pick individual stocks. The key benefits include:

• Diversification: Exposure to various sectors can reduce the impact of poor performance in any single industry.
• Long-Term Stability: Index funds follow overall market trends, offering steady growth potential.

Which Approach is Right for You?

For investors willing to take higher risks and actively manage their portfolios, direct equity investing may be suitable. However, for those seeking a low-cost, diversified, and hassle-free investment approach, the Nifty Total Market Index Fund can offer an efficient way to participate in the market’s long-term growth.

Angel One Nifty Total Market Index Fund

Angel One MF has launched two new Nifty Total Market Index Funds that consider Nifty Total Market TRI as the benchmark.

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

The new fund offer (NFO) was open from February 10 to February 21, 2025.

Angel One Nifty Total Market Index Fund invests 95% to 100% in equities and equity-related securities, including stocks and index derivatives. The remaining 0% to 5% of the assets are allocated to cash, cash equivalents, money market instruments, reverse repo, tri-party repo on government securities, treasury bills, or units of money market/liquid schemes.

Conclusion 

Overall, investors should assess their risk appetite and investment goals before choosing between passive index investing and active stock selection.

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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.

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.