In US, S&P 500 is the most sought index investing and that's why most of the people out there invest in that itself. But if I consider in India, people invest mostly in Nifty 50 only and not Nifty 500. If I consider the difference between the two, Nifty 500 gives more returns than the Nifty 50.
So why people are investing in Nifty 50 and not Nifty 500. This is because the Nifty 500 is much more volatile than the Nifty 50 and the liquidity is less than Nifty 50 and that's why people invest in Nifty 50 much more than the Nifty 500. But when we are investing in the Nifty 50 we are missing put on returns because the Nifty 50 is only large cap.
But in Nifty 500 there is midcap and smallcap which can give 5x to 10x returns for some of the stocks and that's why Nifty 500 give more returns than the Nifty 50. The midcap and smallcap is a India's growth story because the midcap and smallcap gives more returns in the longer run. So if you are a long term investor, investing in Nifty 50 might not be great choice in terms of returns because in longer run Nifty 500 gives more returns than the Nifty 50.
It's not that you should not invest in Nifty 50. But if you are investing for like 10 years or less, investing in Nifty 50 is better option but if you are investing for more than 10 years to 20 years then investing in Nifty 500 is better option as it gives more returns in the longer run. Though Nifty 500 has little higher expense ratio than the Nifty 50 but still it is better option in the longer run in the absolute returns.
