Should you invest in Motilal Oswal S&P 500 Index Fund?

If you are currently investing in mutual funds, there are very compelling reasons to invest in the newly launched Motilal Oswal S&P 500 Index Fund.

What is an Index fund?

An Index fund is simply a mutual fund that tracks or mimics the performance of a particular market index. (For eg. Sensex, Nifty, etc.)

S&P 500 is an index tracking 500 large-cap companies based in the U.S

Why should you invest in Index Funds?

This is what Warren Buffet has to say on Index Funds:

“My regular recommendation has been a low-cost S&P 500 index fund”
“A low-cost index fund is the most sensible equity investment for the great majority of investors”


Here’s why index funds are great for all types of investors

  • Low cost. While regular mutual funds charge 1-2%, index funds are generally around 0.5-1%.
  • Passive investing. Index funds track a prefixed index and eliminate any scope of underperformance or discretion by a mutual fund manager. 

Motilal Oswal S&P 500 Index Fund

Few key features of this fund

  • S&P 500 is probably the most widely tracked index in the world.
  • It tracks the performance of the leading 500 companies in the U.S.
  • While the index is U.S. based, a big chunk of the revenues of these 500 companies comes from outside the U.S. ensuring diversification of geography. (Think Apple, Facebook, Starbucks, etc.)
  • The expense ratio for the Direct Plan is 0.5%. (1% for the Regular Plan).
  • Exit Load 1% if redeemed before 3 months.

S&P 500 returns vs. Indian stocks

Below are the 10-year CAGR (Compounded Annual Growth Rate) returns for the S&P 500 & Nifty 500: (In USD).

Period: 31/12/2010-03/19/2020.

S&P 500: 9.56%

Nifty 500: -0.82%

These are Total Returns which include capital gains and dividends. 

(Data obtained from Motilal Oswal S&P 500 Index Fund website)

Essential Geographical Diversification

We’ve written a few times about this very important concept of diversifying a portfolio into different countries. You can check it out here.

Investing in other countries takes away the dependence on the domestic economy for returns. As we have seen India has had a slowdown in the last few years which is only getting worse due to the current pandemic. On the other hand, while the United States is badly affected, it has experienced very strong economic growth over the last 10 years.

Owning Global Companies With an Indian Presence

Most of us are today are users of products or services of large U.S. companies. We all use Amazon, Facebook, MasterCard, Google, etc. The list is endless. Wouldn’t it be great to also own a portion of these companies? That’s just not possible with local mutual funds. International mutual funds are the only path to foreign equity ownership. Check out some other international funds in this other post. 

Bottom Line

Any investor with a diversified mutual fund portfolio needs to take a serious look at investing in this fund. When the global economy rebounds, the United States would likely recover faster than most other countries. Moreover, the growth track record over the last 100 years of the U.S. is unmatched by any other country.

Leave a Reply

Your email address will not be published. Required fields are marked *