5 Ultimate ETFs for Long-Term Wealth

 Five types of ETFs picked for their portfolio from a long-term perspective for wealth building. They are presented for educational purposes only and are not recommendations.

Here are the five types of ETFs discussed, along with the specific examples and key considerations highlighted by the speaker:

1. ETFs that track the NIFTY50 index

   • These are for investors who believe in the top 50 stocks of India.
   • Examples: Nifty Bees (Nippon AMC) and Nifty I ETF (ICICI Prudential).
   • Key Considerations:
     • Liquidity: Nifty Bees has "huge liquidity" (e.g., 61 lakh to 1 crore+ volumes) and is one of the most liquid ETFs on the exchange. Nifty I ETF is less liquid in comparison, but its volume (e.g., 3-4 lakh daily, 3-13 lakh over 30 days) is still considered "very very good liquidity" sufficient for typical investor needs. Both were deemed liquid enough to be considered.
     • Expense Ratio: Nifty Bees has an expense ratio of 0.04%. Nifty I ETF has a slightly lower expense ratio of 0.03%.
     • Returns: Over the last 5 years, both Nifty Bees and Nifty I ETF showed "very very similar returns," around 22.12% yearly CAGR. Any slight difference in returns might be due to expense ratio or tracking error.
     • Intraday Volatility: A key difference noted was intraday price fluctuation during volatile market days. On June 4th, 2024 (election results day), Nifty Bees fell about 5.38% intraday, while Nifty I ETF fell about 11.3% intraday, potentially offering an advantage to buy at a lower price. On April 7th, 2025 (another volatile day), Nifty Bees fell about 12.45% intraday, while Nifty I ETF fell about 10.46% intraday. This fluctuation depends on daily demand and supply for the specific ETF. If you are not tracking the market daily, this factor might be less relevant.
     • Sector Allocation: The Nifty50 index is heavily skewed towards financial services, with about 35% allocation.

2. ETFs that track the Junior Nifty (Nifty Next 50) index

   • This index takes into account stocks ranked 51-100, still considered the large-cap category.
   • Example: Next 50 I ETF (ICICI Prudential). This particular ETF and the index itself is considered "very very good" in addition to Nifty50.
   • Key Considerations:
     • Returns: It has given slightly better returns than Nifty 50 ETFs over the last 5 years, with a 5-year annual return of 23.09% CAGR.
     • Expense Ratio: The expense ratio is slightly higher at 0.10% compared to the Nifty 50 ETFs discussed.
     • Liquidity: Volumes (e.g., 4 lakh to 9 lakh over 30 days) are considered sufficient, "as liquid as we saw Nifty50 ETFs ICICI one".
     • Sector Allocation: This index is "more evenly distributed" across sectors (e.g., financial services at 17%, FMCG at 11%) and "does not rely on one sector heavily" like Nifty50 does.

3. ETFs from the Midcap category

   • These track the Midcap 150 index.
   • Examples: Midcap ETF (Mirae Asset), Mid 150 Bees (Nippon), and Midcap I ETF (ICICI Prudential).
   • Key Considerations:
     • Liquidity: Mirae Asset's Midcap ETF was found to be the "most liquid midcap ETF" (volumes around 21-59 lakh over 30 days). Nippon's Mid 150 Bees had "very very good liquidity" but less than Mirae (volumes around 12-16 lakh). ICICI's Midcap I ETF also had "very very good liquidity" (volumes around 5-11 lakh).
     • Expense Ratio: Mirae Asset's Midcap ETF is the cheapest at 0.05%. Nippon's Mid 150 Bees is significantly higher at 0.21%. ICICI's Midcap I ETF is 0.15%.
     • Returns: For the 3-year period (as the Mirae ETF might not be 5 years old), Mirae Asset's Midcap ETF returned 19.63% CAGR, slightly better than Nippon's Mid 150 Bees (19.55%) and ICICI's Midcap I ETF (19.55%). Past returns are not a guarantee but give an indication.
     • Sector Allocation: Midcap ETFs tracking the Midcap 150 index are typically "evenly distributed" with no huge dependency on one sector like Nifty50, making it "a very very good index to look at".
     • Preference: Preference among these was the Mirae Asset ETF due to high liquidity, less expense ratio, and better track record on returns, although they reiterate past returns don't guarantee future performance.

4. ETFs from the Smallcap category

   • These track the Smallcap 250 index.
   • Examples: HDFC SML 250 (HDFC) and MOS Small 250 (Motilal Oswal).
   • Key Considerations:
     • Liquidity: Both HDFC (volumes around 8-24 lakh over 30 days) and Motilal Oswal (volumes around 7-14 lakh over 30 days) have "pretty good liquidity" and are considered "really really good" from this perspective.
     • Expense Ratio: HDFC's ETF has an expense ratio of 0.20%. Motilal Oswal's ETF has a slightly higher expense ratio of 0.30%.
     • Age/Track Record: Motilal Oswal's ETF was recently launched and had not completed 3 years at the time of recording, making it difficult to compare returns. Prefers the HDFC one because it is "slightly older" and has a "slightly lower" expense ratio. From a returns perspective, one might not find much difference between comparable ETFs, possibly only "some points difference because of mainly either expense ratio or tracking error".

5. Momentum ETF

   • This is a "smart beta ETF" that follows the NIFTY 200 Momentum 30 index, which is described as a "very very popular index recently".
   • Examples: HDFC Momentum (HDFC) and MO Momentum (Motilal Oswal).
   • Key Considerations:
     • Index Performance: The Nifty 200 Momentum 30 index strategy has "comfortably beaten nifty in the last 5 years 10 years 20 years" based on historical data presented (e.g., 26.10% total annual return vs 11.33% price annual return for Nifty50 over 5 years as of March 2025).
     • Expense Ratio: HDFC Momentum has an expense ratio of 0.30%. MO Momentum has an expense ratio of 0.30% as well. Although earlier mentioned MO Momentum was slightly costlier, the figures provided show the same expense ratio. Self-correction: The speaker states MO Momentum is slightly costlier but then provides the same expense ratio figure. Based on the numbers, the expense ratio is the same. The speaker later clarifies HDFC moment is slightly better due to lesser expense ratio. Self-correction 2: Re-reading, the speaker says MO Momentum is 'slightly costlier as compared to HDFC1' and gives the expense ratio as 0.30%. For HDFC Moment, the expense ratio is given as 0.30%. However, at the end, the speaker states HDFC Moment is slightly better because of 'lesser expense ratio'. There seems to be a minor contradiction in the transcript regarding the exact expense ratio difference.
     • Returns: At the time of recording, the speaker notes these ETFs might show negative returns over the last year due to a market downtrend, and some are recently launched. Long-term index data shows strong performance relative to Nifty50. Both ETFs are "likely to be very very similar" in terms of returns.
     • Liquidity: Liquidity is not as high as Nifty50 ETFs but is considered sufficient for typical investor transaction sizes (e.g., trading 1,000-3,000 units), making it easy to find buyers and sellers. Volumes are generally in the range of 1-2 lakh over 30 days.
     • Preference: The HDFC Moment slightly better due to lesser expense ratio, though notes this difference might be minor and contribute to only small return differences.

These are the five categories of ETFs and the specific examples, highlighting the factors they considered when choosing them for long-term wealth building. That even small differences in annual returns can make a "big difference" in wealth over a long period. ETFs offer a "very very cheap way of investing" compared to many mutual funds due to low expense ratios.

Source :  Summary of Video