An Exchange-Traded Fund (ETF) is a type of investment fund traded on stock exchanges, offering a diversified portfolio of assets like stocks, bonds, or commodities. ETFs combine the benefits of mutual funds and stocks, providing low-cost diversification, flexibility, and liquidity. They are ideal for both beginner and seasoned investors, catering to various goals like growth, income, or risk management. Popular ETFs track major indices like technology, real estate, or emerging markets. With typically lower expense ratios than mutual funds, ETFs are a cost-effective way to build a diversified investment portfolio. Here are 10 leading ETFs, favored for their performance, low fees, and coverage:
Top Long-Term ETF in India for 2025 as per high returns
| ETF Name | Return (Approx.) | Market Capitalization |
| Nifty 50 ETF | 15% CAGR over 20 years | Traded Value: ₹173 crore daily |
| Nifty Next 50 ETF (Junior Nifty) | 15.3% CAGR over 15 years | ₹5450 crore |
| Motilal Oswal MidCap 100 ETF | 14% CAGR over 13-14 years | ₹545 crore |
| HDFC Small Cap ETF | Over 50% per year for the past 1.5 years (recent rally) | Not specified but strong rally observed |
| CPSC ETF (Central Public Sector ETF) | 8-10% CAGR over 11 years | ₹4325 crore |
Key Factors to Consider Before Selecting ETF for Long-Term Investment
Here are critical considerations to keep in mind when planning to invest for the long term:
- Market Capitalization of the ETF Should Exceed Rs 100 Crores
ETFs (Exchange-Traded Funds), market capitalization refers to the size of the companies included in the ETF. Choosing an ETF that focuses on companies with a market cap of more than ₹100 crores is a safer option. This is because larger companies are generally more stable, financially strong, and less risky compared to smaller ones. ETFs that track large-cap or mid-cap indices, such as the Nifty 50 or Nifty Next 50, often include these well-established companies. Investing in such ETFs helps reduce risks and provides more reliable growth for your investments over time.
- Sustained Profit Growth Over the Long Term
When investing in ETFs, sustained profit growth of the companies within the ETF is a key factor. ETFs that track indices like Nifty 50, Nifty Next 50, or sector-specific indices often consist of companies with a track record of consistent profit growth over five to ten years. This indicates that the companies are financially strong and have good prospects for the future. Choosing ETFs that include such companies allows investors to benefit from their long-term potential without having to select individual stocks. It’s a simple way to ensure stability and steady growth in your investment portfolio over time.
- Diversification
It is always advisable to diversify your investment portfolio across various industries and asset classes to spread risk. Holding a mix of stocks, bonds, real estate, and other investment vehicles can help cushion your portfolio from market fluctuations. Diversification can enhance the overall stability and potential returns of your long-term investment strategy.
- Research
Investing in ETFs, conducting thorough research is essential to make smart choices. Start by understanding the index the ETF tracks and the type of companies it includes—whether they are large-cap, mid-cap, small-cap, or sector-specific. Assess the financial health, growth potential, and competitive strengths of the companies within the ETF. Look into industry trends and how market conditions or regulatory changes might affect the ETF’s performance. Additionally, review the ETF’s expense ratio, historical returns, liquidity, and tracking error to ensure it fits your goals. Staying informed about the overall economic landscape helps you pick ETFs aligned with your long-term strategy.
- Time Horizon
Long-term investing requires patience and discipline. Define your investment time horizon based on your financial goals and risk tolerance. If you have a longer time frame, you may be able to take on more risk, whereas shorter-term goals may call for a more conservative approach. Understanding your time horizon will help you align your investment choices accordingly.
- Avoid Emotional Decision Making
Emotions can influence investment decisions, leading to impulsive actions during market fluctuations. Avoid making hasty decisions based on fear or greed. Stick to your long-term investment plan and avoid frequent buying and selling, known as market timing. Emotional investing can hinder your ability to benefit from the compounding effect of long-term investments.
Overview of the top 5 ETF in India as per market capitalisation
Nifty 50 ETF
The Nifty 50 ETF has delivered a strong 15% compound annual growth rate (CAGR) over the past 20 years, showcasing its long-term growth potential. With a daily traded value of ₹173 crore, it is a highly liquid and stable investment option, reflecting its popularity and reliability among investors.
Nifty Next 50 ETF
The Nifty Next 50 ETF, also known as Junior Nifty, has provided a solid 15.3% compound annual growth rate (CAGR) over the past 15 years. With a market capitalization of ₹5450 crore, it offers exposure to the next set of high-growth companies, making it a strong choice for long-term investors.
The Motilal Oswal MidCap 100 ETF
The Motilal Oswal MidCap 100 ETF has delivered a 14% compound annual growth rate (CAGR) over the past 13-14 years. With a market capitalization of ₹545 crore, it offers exposure to a diversified portfolio of mid-cap stocks, providing strong growth potential and a solid long-term investment opportunity.
The HDFC Small Cap ETF
The HDFC Small Cap ETF has experienced a strong rally, delivering over 50% annual returns in the past 1.5 years. Although its exact market capitalization is not specified, the recent performance highlights its potential for high growth, making it an attractive option for investors willing to take on higher risk for greater rewards.
The CPSC ETF (Central Public Sector ETF)
The CPSC ETF (Central Public Sector ETF) has provided an 8-10% compound annual growth rate (CAGR) over the past 11 years. With a market capitalization of ₹4325 crore, it focuses on state-owned companies, offering stable returns and the potential for growth as these companies continue to perform well in the market.
Kotak Nifty Alpha 50 ETF
The Kotak Nifty Alpha 50 ETF has delivered an 8-11% compound annual growth rate (CAGR) over the past 15 years. While its exact market capitalization is not mentioned, the ETF focuses on the top 50 stocks with the highest alpha, offering stable returns and the potential for long-term growth.
Conclusion
Investing in the stock market can be a rewarding journey if done with careful planning and a long-term perspective. The top ETF as per market capitalisation listed in this blog are well-established ETF with proven track records of growth and sustainability. However, remember that investing always carries some level of risk, and it’s essential to align your investment strategy with your financial goals and risk tolerance.
While diversifying your portfolio across these top ETF can help spread risk, it’s equally important to conduct thorough research and consult with financial experts if needed. Keep in mind the significance of long-term investing, allowing compounding to work in your favour over time. Lastly, review your portfolio periodically, making adjustments when necessary to stay on track with your investment objectives.