What is ETF in mutual funds?
Introduction
Have you ever thought that you can invest in the stock
market without choosing individual shares and still earn like big players?
Where ETFs come, they are like mutual funds, but with a twist that makes them
preferred to many investors.
Let's break it into simple language.
What is ETF?
ETF is for exchange traded funds. Think of it like a basket
of stock - similar to a mutual fund - but you can buy and sell it like a
regular stock on the stock exchange.
Imagine going to a supermarket. A mutual fund is like a
monthly grocery membership - you pay, and they send you a curate box of grocery
items.
An ETF is like going to the store on its own and buying the
same box whenever you are available.
How is ETF different from a mutual fund?
Here is a quick comparison:
• Purchase method: Mutual funds are purchased through AMC or
apps; ETFs are purchased through stock exchanges.
• Price: Mutual funds are priced at the basis of NAV (end of
day); ETF trade in real time like stocks.
• Minimum amount: Mutual funds can start as ₹ 100; ETFs
depend on the price of a unit.
• Liquidity: Mutual funds take 1-2 days in the process; ETFs
offer immediate purchase/sales during market hours.
Types of ETF in India
1. Track the index ETF - Nifty 50 or an index like sense.
Example: Nippon India Atf Nifty Beez
2. Gold ETF - Track the price of gold. Example: HDFC Gold
ETF
3. Sectoral ETF - focus on fields like banking or IT.
Example: ICI
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