#etffunds

The financial market of India has evolved greatly in the last few decades. There are several new financial instruments in the market that are known to deliver high returns; however, they also are associated with a high-risk factor. For those who want to invest in the equity market but don’t have the expertise of investing, opt for mutual funds. However, on the other hand, another financial instrument that’s seeing a spike in its demand is ETF – Equity Traded Fund. While ETFs and mutual funds have a lot in common, there’s also a lot that distinguishes them. In today’s blog, we’ll see how ETFs are different from mutual funds: 

Way of management: A significant point of difference between ETFs and mutual funds is the way the fund is managed. In mutual funds, some are actively managed by the fund manager, and some are passively managed. On the other hand, ETF funds are mostly passively managed and are pegged against specific indexes. 

Traded: ETFs are like equity stocks which are listed on the stock exchange. Their prices change throughout the day, just like any other equity stock. ETF funds can be bought at the market price during market hours. On the other hand, mutual fund prices change only once a day. ETF funds’ price is determined based on demand and supply.

Minimum investment: ETFs are traded on the stock exchange, and thus, there’s no minimum investment amount criteria. However, most mutual funds do have a minimum investment requirement. 

Cost implication: The cost for managing an ETF Fund and Mutual Fund is different. Hence, the expense ratios of both ETF funds and mutual funds are different; however, ETFs also attract trading costs and transaction costs, as set by the Demat holding company on which one would typically buy or sell an ETF fund. 

These are just some of the differences between ETFs and mutual funds. ETFs are good for you, if: 

Trade actively: If you are someone who enjoys actively getting involved in trades, then ETFs are great for you. Before you invest in ETFs, you need to understand price fluctuations, demand-supply relations, and so on. 

Time: ETF funds are great for those who have the time to keep a tab on their investments. If you won’t be able to dedicate time to your investments, ETFs might not be the right choice for you. 

Control: If you like to have full control of your investments, but you don’t understand which stocks to choose, then ETFs are great for you. When you buy the best Indian ETFs, you get the same returns as a specific index. 

Saving is a habit that is ingrained in most of us. Indians are taught to save since childhood; as a result, the demand for different saving instruments is high in India. From fixed deposits to ETF funds, a range of saving options are available in the market today. With so many choices, it can be hard to choose one. There are many factors to consider while choosing an investment instrument, such as return on investment, the risk involved, and so on. While mutual funds are extremely popular, people are now leaning towards ETF funds. Today’s blog will be all about ETF funds and how to choose the best one: 

First, let’s understand ETF funds: 

ETF stands for Exchange-traded funds, and as the name suggests, these are saving instruments that are traded at the stock exchange. ETFs operate a lot like mutual funds. ETFs can be purchased or sold on the stock exchange, like any regular stock. ETFs usually track a particular index, commodity, or asset and the growth is depicted basis the index or asset it is tracking. 

Features of ETFs: 

Tax: ETFs attract usual tax liability at the time of selling the security. However, because of lower portfolio turnover, the tax implication may be lower than a mutual fund redemption. 

Intraday trading: as mentioned earlier, ETFs are traded at the stock exchange, just like any other stock. This means, ETFs are also eligible for intraday trading. Those who have an idea about ETF trading can make additional money through this stream, thereby leading to higher savings. On the other hand, this also means higher liquidity. ETFs can be liquidated instantly and in a hassle-free manner. 

Transparency: ETFs are extremely transparent; therefore, you know exactly where your money is being invested and how returns you are getting on that. ETFs are a great investment opportunity for new investors or for those who don’t want to bear serious risks. 

Now that we’ve understood the features of ETF funds, let’s understand the different types of ETFs you can choose from. 

Typically, ETFs are available in four broad categories: 

Index ETFs: benchmarked to Nifty/Sensex. 

Gold ETFs: The rate of this depends on the market price of 24k gold.

Thematic ETFs: These could be benchmarked to any industry or commodity, or similar theme. 

International ETFs: Through international ETFs, you can invest in funds abroad. Typically, an international ETF fund invests in companies that are based abroad – the US, Japan, or Europe.