ETF

ETFs are a type of mutual funds that tracks an index, a commodity or a basket of assets like an index fund. However, unlike regular mutual funds, Exchange-Traded Funds are listed on an exchange, and trades like a stock. It, thus, experiences price changes throughout the day as and when it is bought and sold. Assume a fund that has all Sensex 30 stocks. Let’s call it the Sensex Fund. This fund, with its basket of 30 stocks, gives you the advantage to diversify your risks. Trading in an ETF is just like buying or selling the Sensex Fund or any other Index Fund listed on the Stock Exchange. Since the Sensex Fund trades like the stock, the price of the Sensex Fund fluctuates during the market hour. This is unlike a mutual fund, whose NAV, or price, is calculated at the end of the day.

• ETFs based on broad market indices provide diversification to your investments.


• Buy and sell at real time price.


• Ideal for retail investors as minimum lot size to trade is one unit on secondary market.


• Low expense ratios as one would not be paying entry and exit loads and management fees.


• Trading of ETFs on exchange provides flexibility and liquidity to your investments.


• Exchange-Traded Funds tend to replicate the performance of the underlying with least error ratio.


• ETF holdings are readily disclosed, making your investment highly transparent.


• Quick and convenient dealing through demat account.


• Offers the risk diversification of a mutual fund.