ETFs are typically a basket of securities which can be invested into just as a mutual fund either directly or through a brokerage. The features of ETF are similar to stocks, bonds and mutual fund.
Now note these ETFs which are a type of mutual fund are available with underlying being virtually any conceivable asst such as commodities, current, gold or index for that matter.
Type of ETFs:
1. Active equity ETFs:
The investment or fund managers can use their discretion and not go just by the benchmark index. The risk can be higher but it comes associated with higher cost as well as risk.
2. Diversified passive equity ETFs:
These ETFs have their portfolio akin to the popular benchmarks like Sensex and Nifty. Also, their return mirror more or less the index' returns.
3. Fixed-income ETFs -
These ETFs typically have bonds in their portfolio and are mostly stable for the most part.
How ETFs work?
An ETF as we said earlier has an amalgamation of features of bond, stocks and mutual fund. It is traded like a stock during the day and it similar to stock also has a ticker symbol. But in contrast to a company stock, the number of shares outstanding of an ETF can change daily owing to the continuous creation of new shares and redemption.
So, because of the continuous creation as well as redemption of ETF shares on an ongoing basis, the ETFs market price is in line with their underlying securities.
Why you should invest in ETFs?
In the August AMFI data, there has been revealed that inflow into ETFs has increased to Rs. 11591 crore from the previous month. And investments into the avenue is advocated for tax benefit that is not available with mutual funds.
Furthermore as these schemes are managed close to the underlying benchmark, costs or annual expense for them is lower.
There is no minimum investment criteria for investment in these ETFs.
ETFs are freely traded in the market and can be bought and sold as per the investor's convenience. Their real time market price is available similar to stocks.
Top rated ETFs to invest in now
|ETF Fund||CRISIL Rank||1-year return||3-year return|
|UTI Sensex ETF||Rank 1||45.72%||14.35%|
|SBI ETF Sensex||Rank 1||45.71%||14.34%|
|HDFC Sensex ETF||Rank 1||45.69%||14.32%|
|Kotak Sensex ETF fund||Rank 1||45.42%||14.10%|
The CRISIL rating for mutual fund/ ETFs is based on past performance and cannot guarantee similar performance in the future. Furthermore, the information is collated just for informational use and should be construed for investment advice in these ETFs.