Mumbai, April 19, 2021: India’s homegrown digital financial services platform Paytm, today announced that its wholly-owned subsidiary ‘Paytm Money’ is empowering the country’s retail investors with access to top tech stocks from the US in association with Mirae Asset’s NYSE FANG+ ETF. The country is already one of the largest markets for companies like Facebook, Amazon, Netflix, and Google (Alphabet) – FANG, and its importance will only rise over the next decade.
NYSE FANG+ Index is a focused index and includes the original FANG companies + 6 tech leaders in the global Markets – Apple, Alibaba, Baidu, Nvidia, Tesla, and Twitter. Most of these are household names for millions of Indians, and the NFO is expected to be a success, driven primarily by the impressive 102% return delivered by NYSE FANG+ Index over the last year. The underlying tech stocks like Tesla delivered 390% return, and Google (Alphabet) delivered 80% return during this period.
Along with the NYSE FANG+ ETF, Mirae Asset is also launching a mutual fund scheme (NYSE FANG+ ETF Fund of Fund) which will predominantly invest in NYSE FANG+ ETF. From an investor’s perspective, there are certain things to be considered before deciding on the right instrument. The table below clearly lays out these considerations:
| ETF | Direct MF |
Regular MF |
|
| Expense Ratio |
0.33% |
0.50% |
1.00% |
| Fund Type |
Passive | Open-ended |
Passive | Open-ended |
Passive | Open-ended |
| Flexibility | Higher Flexibility
Traded in the market throughout the day at real time prices. |
Lower Flexibility
Can only be bought or sold with the AMC. Transaction happens only once a day, and investors have limited control over the final price |
Lowest Flexibility
Can only be bought or sold with the AMC, via a distributor. Transaction happens only once a day, and investors have limited control over the final price |
| Minimum Investment (NFO) |
Rs. 5,000 |
Rs. 5,000 |
Rs. 5,000 |
| Minimum Investment (Post NFO) |
1 unit |
Lumpsum: Rs. 5,000 SIP: Rs. 5,000 |
Lumpsum: Rs. 5,000 |
| Investment Mode |
Stock Trading Account |
AMC / Direct MF platforms |
MF Distributor |
Illustrative comparison of investing across all three modes with a 3-year holding period is shown below:
|
ETF |
Direct MF |
Regular MF |
||
| Investment Amount |
100,000 |
100,000 |
100,000 |
|
| CAGR |
20% |
20% |
20% |
|
| Expense Ratio |
0.33% |
0.50% |
1.00% |
|
| Total Expense |
1,422 |
2,151 |
4,284 |
|
| Investment Value @ Year 3 |
171,378 |
170,649 |
168,516 |
|
| Return (Before Tax) |
71,378 |
70,649 |
68,516 |
|
| LTCG Tax @20%
(Assuming – Indexation |
11,778 |
11,633 |
11,206 |
|
| Net Return (After tax) |
59,600 |
59,016 |
57,310 |
NYSE FANG+ ETF is the lowest cost alternative, followed by a direct mutual fund. ETF also offers the most amount of flexibility vs other alternatives, and for the majority of investors, NYSE FANG+ ETF should be the preferred route. For a small proportion of users who intend to invest a small sum and are unable to open a Demat account, the Direct MF route might be suitable. Regular MF turns out to be the most expensive because of the distributor commissions involved.
Paytm Money will enable its massive user base with the opportunity to bolster its portfolio and have international exposure. The company’s stockbroking initiative is helping bring in more active direct equity investors in the highly under-penetrated segment. It expects this to be one of the biggest drivers of wealth creation over the next decade. It has opened over 1.6 lakh Demat accounts, with over 50 percent of the users being from smaller cities & towns. Paytm Money Stocks aims to more than double the number of accounts to over 3.5 lakh by year-end. It hopes to provide all this to the users in the most cost-effective, reliable & secure manner to both new and experienced investors.
Varun Sridhar, CEO of Paytm Money said, “NYSE FANG+ index represents some of the most dominant tech players globally, and has delivered more than 40% CAGR over the last 3 years. The retail Indian investor today is increasingly looking to diversify beyond traditional funds and asset classes, and Mirae Asset’s NYSE FANG+ ETF is a very attractive proposition at an expense ratio of only 0.33%. We are expecting a lot of demand for this offering. ETF as a category has been very popular in the US markets for quite some time, and we are now seeing ETFs gain acceptance in India as well, with 27% of Paytm Money’s equity users already owning at least one ETF in their portfolio. ETFs are a great way to build long-term wealth, and we believe it will be one of the most important investment instruments for the next decade of investing in Indian capital markets”.
