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What is Exchange Traded Fund (ETF)?
An exchange traded fund,or ETF, is a cluster of different securities merged together in a single fund that is traded on the stock exchange. Most ETFs track a benchmark or an index and try to replicate its performance, making it easier for an investor to buy or sell their shares of an ETF through a broker. ETFs trade at the stock exchange much like the price of other stocks.
Objective of ETF
The objective of an ETF is to offer an array of investment strategies at low cost and is not limited to stocks. An investor can invest in bonds, commodities, derivatives or a mix of securities therefore providing diversification to build a customised investment portfolio according to financial goals at low cost than most of the other offerings.
As it is known for its diversification and can be traded on the stock exchange, ETFs ensure swift trading options based on market views and rapid development in global events.
ETFs allow minimal investment that can help beginner investors to invest with a small investment.
Difference between ETF and Mutual Fund?
- Due to their similar characteristics, both represent a basket of securities or bonds, an ETF or Mutual Fund can be taken for being the same but offers different features. Most notable is that an ETF, similar to stocks, can be traded throughout the trading day soon after the exchange opens while a Mutual Fund can be bought or sold only after the market closes for the day.
- Further, an ETF can be more tax efficient as an investor has to pay taxes only when they sell their shares whereas, in a Mutual Fund, the investor has to pay tax as long as they have holdings. Most ETFs are also index-based that translates to lower turnover than active funds leading to fewer chances of facing capital gains distributions.
- An ETF incurs a lower fee as it is passively managed by a manager compared to a Mutual Fund, which has to be actively managed, thus the fee increases.
Latest Updates on ETF
Passive trackers likely to sell 67 mn shares; another 1.35 bn could be offloaded by individual investors
The new methods include transfer of shares held by promoters to an ETF run by a Sebi-registered MF, exercising options and allotment of shares under ESOP programmes
Adverse feedback could lead to reduction in weightage of Adani stocks in MSCI indices
Year-to-date, 53% of thematic funds are underwater since their inception. Launches in 2022 have slowed to 38 from the 77 seen in the previous year, while closures have picked up to 20 from five
The government will launch the fourth tranche of Bharat Bond ETF, India's first corporate bond exchange traded fund, from Friday
The year hasn't been kind to the ETF and growth-centered products as the Federal Reserve raises rates to knock down scorching levels of inflation
Average AUM for industry rose to Rs 39.5 trn, compared to Rs 37. 8 trn in July
Index inclusion comes after the 'best has played out for the stock' is an overarching concern
As per industry data, so far, Aditya Birla Sun Life Mutual Fund, ICICI Prudential Mutual Fund and Nippon India Mutual Fund have launched silver ETFs
From investing in traditional instruments, the Employees' Provident Fund Organisation (EPFO) has been exploring the virtues of markets for a while now. Is the statutory body's move bearing fruits now?
Three experts explain how planning and patience can you give the cushion of savings, investments, and cash on hand
Market players seek clarity from exchanges on the exclusion rule
They are more transparent and control both interest-rate and credit risk
Industry players expect assets to double in five years
New investors are better off picking diversified offerings
According to the WGC 'Gold Demand Trends Q1 2022' report, global gold demand surged to 1,234 tonnes during the January-March quarter supported by strong demand for electronic traded funds (ETFs)
The dollar and Treasury yields eased a day after the Federal Reserve raised interest rates by a quarter percentage point, with investors having priced in an even stronger rate hike
Aims $1 billion in assets under management by two years; will track large cap metaverse stocks too
The funds raised through the debt ETF helps in smoothening borrowing plans of the participating CPSEs or public sector banks