copied from my Blog:
There are tomes of books infavour of investing in Index Funds. One of the most common argument favouring index funds is their low transaction costs. The stocks in the index are changed in regular intervals to add/ delete stocks. This creates a churn rate in the Index funds. The average churn rate of index fund is around 33.42%, which is nearly 1/3rd stock every year. It nearly pokes hole in to the Buy and Hold strategy. Below is a table which examines the churn rate of various Nifty Indexes.
Index Name No of years No of stocks Total changes changes per yr Avg. change per yr wrt index size
Nifty 100 13 100 238 18.31 18.31%
Nifty 200 5 200 228 45.60 22.80%
Nifty 50 20 50 160 8.00 16.00%
Nifty 500 18 500 1837 102.06 20.41%
Nifty Alpha 50 3 50 240 80.00 160.00%
Nifty Auto 5 15 8 1.60 10.67%
Nifty Bank 16 15 22 1.38 9.17%
Nifty Commodities 5 30 14 2.80 9.33%
Nifty Dividend Opportunities 50 4 50 74 18.50 37.00%
Nifty Energy 11 10 18 1.64 16.36%
Nifty Financial Services 5 15 10 2.00 13.33%
Nifty FMCG 18 15 64 3.56 23.70%
Nifty Growth Sectors 15 2 15 10 5.00 33.33%
Nifty High Beta 50 3 50 84 28.00 56.00%
Nifty India Consumption 4 30 24 6.00 20.00%
Nifty Infrastructure 12 25 68 5.67 22.67%
Nifty IT 17 10 96 5.65 56.47%
Nifty Low Volatility 50 3 50 72 24.00 48.00%
Nifty Media 4 15 20 5.00 33.33%
Nifty Metal 5 15 24 4.80 32.00%
Nifty Midcap 100 11 100 346 31.45 31.45%
Nifty Midcap 50 12 50 226 18.83 37.67%
Nifty Midcap Liquid 15 1 15 14 14.00 93.33%
Nifty MNC 18 15 237 13.17 87.78%
Nifty Next 50 16 50 262 16.38 32.75%
Nifty Pharma 13 10 20 1.54 15.38%
Nifty PSE 18 20 94 5.22 26.11%
Nifty PSU Bank 11 12 4 0.36 3.03%
Nifty Realty 9 10 33 3.67 36.67%
Nifty Services Sector 16 30 80 5.00 16.67%
Nifty Smallcap 100 5 100 212 42.40 42.40%
Nifty100 Liquid 15 2 15 20 10.00 66.67%
Nifty50 Value 20 1 20 4 4.00 20.00%
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