TLDR: Why I added the UTI Nifty 200 Momentum 30 index fund to my index portfolio

Introduction

Regulars to the blog would have seen that I have a new index fund added to my portfolio as a part of my SIP (Systematic Investment Plan) investments right from the moment the fund was introduced.

Fund summary

• Month End AuM - 559.43 Cr

• Monthly Avg. AuM - 523.40 Cr

• No. of Folio Accounts - 22,619

• Minimum Investment Amount - 5,000

• Total Expense Ratio (TER) - Direct: 0.39 , Regular: 0.9

• Benchmark Index - Nifty200 Momentum 30 Index

• Exit Load - Nil

https://www.utimf.com/mutual-fund-products/equity-funds/uti-nifty200-momentum-30-index-fund/ - UTI Nifty 200 momentum 30 index fund

Reasons

I was trying to summarise the research for this blog post when I came across this wonderful explanation from ET money Youtube channel. They are doing a much better job than I could ever write in this blog post.

So you can hear directly from the source here

Fund performance (back tested results)

Since the fund has only started around 6 months ago, long term performance is based on back testing of the Nifty 200 momentum 30 index over the last 15 years. A 10K investment in 2005 on the respective indices results in

• Nifty 50 TRI - 1.05 Lakhs (10X)

• Nifty 200 TRI - 1.57 Lakhs (16X)

• Nifty 200 Momentum 30 Index TRI - 2.38 Lakhs (24X)

My Returns

I started invested in this fund when the NFO was launched on 12-Mar-2021. So slightly more than 6 months, hardly enough time to measure performance given that my holdings are for the long term (7 years or more).

So an XIRR as of 22-Oct-21 of nearly 59%, not bad for a 7 month SIP.

Risks & Downsides

The momentum 200 funds is not without its risks and downsides. Some key ones

• The momentum funds are very volatile more than the Nifty 200 fund.

• The underlying index fund is rebalanced only twice a year which means short momentum runs might not be captured and there is a risk of “missing the boat” both on the upside and downside.

So investing on this fund is not for the weak of heart.

Why I added this fund

Since my portfolio really need this fund? My portfolio of index funds already has 3 index funds

1. UTI Nifty 50

2. UTI Nifty next 50

3. Motilal Oswal Midcap 150

So between these 3 funds i already have Nifty 200 and more covered. So do I really need this fund?

Momentum investing is still relatively new in India via a fund and the historical returns based on back tested data is promising as it handily beats the underlying benchmarks with the overall return of more than 15% CAGR over the last 15 years.

Conclusion

At the risk of sounding like a broken record, please do not blindly follow my recommendations. Do your own research, the goals, investment horizons and risk tolerance of every individual is different. Investing is more about temperament and patience than pure skill or knowledge.

Are you thinking of adding this to your portfolio? Leave your comments below.

Good Luck and Happy investing.

#MyFatFIRE