💰 One Mutual Fund to Rule Them All?
This Mutual Fund can help you invest in the entire US Stock Market with just a click!
What if we told you that you could buy the entire US stock market at the click of a button? You would probably think that we are out of our minds, right?
Well, there indeed is a way. An affordable way.Â
But the real question is, should you?
Don’t worry. Today, we decode the how, why and what of a new investment instrument for you.
Purchasing the US stock market: What?
With the recent Meta crash, the US stocks are again on the radar.Â
Maybe you’ve heard of people talking about Nasdaq 100 and S&P 500? If you haven’t, they are like the Nifty and Sensex of the United States. Just by looking at these two indices, you can get an idea of how the US stock market is performing.
But that’s just for the regular crowd, for people like you and me.Â
Not for the folks at Wall Street.
There’s another index that gives a much better idea about the US stock market as a whole. An index that even Wall Street keeps a tab on. It covers more than 4,000 stocks in all categories (large, big, and small companies) as compared to just 100 and 500 large-cap companies covered by Nasdaq 100 and S&P 500 respectively.Â
The index that we are talking about is called CRSP US Total Market Index. It covers almost 100% of the listed stocks in the United States.
What makes CRSP all the more interesting is that in 2020 it outperformed S&P 500 by 2.59% - the widest margin since 2013. Why did that happen?
Because S&P 500 only considers profitable companies, which is not a criteria for CRSP. This made them miss Tesla when it was soaring.
Now, why are we talking indices?Â
The way we have passive funds that track (or duplicate the movements of) Nifty 50 or Sensex in India, there is an ETF (Exchange-Traded Fund) that tracks the CRSP index.Â
Vanguard AMC, which is the second-largest AMC (asset management company) in the world, has an Exchange Traded Fund (ETF) called the Vanguard Total Stock Market ETF that tracks the CRSP index. It is the largest ETF, worth $1.3 trillion, covering 10% of all assets in US stock mutual funds and ETFs.Â
As of 31 December 2021, this fund has given an annualised return (in rupee terms) of 28.15%, 20.11%, and 20.27% in the last 1 year, 5 years, and 10 years, respectively.Â
But ReadOn, why do I care about an ETF in the United States?Â
Enter: Navi US Total Stock Market Fund of Fund
 A new Mutual Fund offering in India that invests in the units of Vanguard Total Stock Market ETF.Â
This means that now you can get a bite of the entire US stock market just by buying units of Navi US Total Stock Market Fund of Fund. What’s more? The Total Expense Ratio (the cost of managing the fund) is 0.06%, which is one of the lowest expense ratios in India.Â
This new fund comes at a time when SEBI has stopped AMCs from making further investments in overseas funds and securities.Â
But in that case, how can Navi offer such an option?
Because this restriction is currently not applicable in the case of investments made by AMCs in ETFs.
While the other doors of investing in US funds are getting closed, Navi offers a window of opportunity.
Getting an opportunity to invest doesn’t mean that you should grab it with both hands. One should ask themself if the opportunity is worth their dime.Â
This investment will help you diversify your portfolio into the US Market, which is also among the top-performing markets of the world. Even if you have been investing in the Indian stock market, data shows that there is a low correlation between the Indian and the US stock market, which means that even if there is a bloodbath in one economy, a portion of your funds is invested in the other economy could stay protected.
Plus, there is this reduced hassle of studying the US stock market and identifying the right stock, as Navi provides exposure to the entire market. Your investment will further be diversified across several sectors.
And when you are investing in this fund, you are also betting on currency appreciation. You see, your rupee investments will be converted into dollars to be invested in Vanguard by Navi. When you encash your investment, you will have the added advantage of gaining through dollar appreciation against rupee.
But there are certain other things that need to be kept in mind while investing.Â
Even though the underlying asset of Navi Mutual Fund, Vanguard Total Market Index, covers the entire ‘stock market’ of the US its performance is quite dependent on its top 10 holdings.Â
Investing in stock markets is always risky, even if it is done via mutual funds. Sitting calmly through volatile times is not everyone’s cup of tea. This makes Navi US Total Stock Market Fund of Fund suitable for those who are seeking long-term capital appreciation.
Weigh in your options. And if you are looking to buy, you can check it out on Groww, Coin by Zerodha, Paytm Money, IndMoney, Kuvera. This new fund will be open for investments till 18 February.Â
Keep learning, keep investing.
The revolution is on.
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