What is the Nifty Alpha Low-Volatility 30 Index and explore what it offers to investors.

The Story

When you invest in the stock market, you’re looking for two things. First, you want returns that are better than the usual market returns. And second, you want those returns to come steadily, without too many big ups and downs along the way.

Today, we’re diving into an index that aims to deliver both of these goals. Introducing the Nifty Alpha Low-Volatility 30 Index.

Nifty Alpha Low-Volatility 30 Index

In finance, ‘alpha’ means an extra return an investment makes compared to a benchmark, a broad market index. Now you would have guessed why we have named this newsletter Alpha 😉

A positive alpha means the investment performed better than its benchmark and low volatility means the price stays relatively steady without big ups and downs, indicating a more stable and less risky investment.

So the index is designed to reflect the performance of a portfolio of stocks selected based on a top combination of Alpha and Low Volatility. The Index consists of 30 stocks selected from 150 top large and midcap companies.

Sector Representation of Nifty Alpha Low-Volatility 30 Index

How the index has performed?

Data from NSE shows that the index has a base date of April 1st, 2005, with a base value of 1000.

As of 31st October this year, the index has delivered 20.23% compounded annual returns have a standard deviation of 17.54, during this ~20-year period.

💡 Standard Deviation

It measures how much an investment’s returns vary from its average return. A higher standard deviation means returns are more spread out and unpredictable, while a lower standard deviation means more consistent returns.

To Conclude

The Nifty Alpha Low-Volatility 30 Index offers midway for investors who want to strike a balance between a higher return and stability. Currently, only four mutual funds offer this index fund, making it a relatively new category in index funds.

As always, even low-volatility investments are subject to market fluctuations, so aligning them with your risk tolerance and long-term goals is important.