ETFs with their functioning similar to mutual funds are different in the sense that they are passively managed, implying to say there are no fund managers to buy the stocks based on the objective of the fund scheme. So, ETFs or exchange traded funds are mutual funds that are listed on exchanges and traded similar to stocks.
Now what distinguishes these ETFs or how ETFs can help one generate good return over time
1. Sectoral investment also possible:
These help us to diversify one's portfolio and are available across indices so enable investors to choose from any of the asset class. Moreover, there are sectoral ETFs also available say you see pharma stocks booming amid the pandemic but are not able to choose one then you can go for pharma ETF that has the benchmark as Nifty Pharma index. And so, the ETF shall largely replicate the returns generated by Nifty Pharma.
2. Easy and Low-cost means to get exposure to Nifty and Sensex basket:
By just buying a single ETF share, investors will have exposure to the entire basket of Nifty 50 and Sensex stocks. So it entails a very easy process to buy into ETFs with no compulsion to spend immensely. ETFs being managed passively carry low charge in comparison to mutual funds.
3. Multiple assets can be bought into:
Other than stocks, these ETFs also offer the opportunity to buy into gold, government securities as the underlying.
4. Offer High liquidity:
In comparison to other mutual fund types such as ELSS or equity linked savings scheme that come with a definite lock-in of 3 years, there is no liquidity constraint with ETF. In fact they score over general mutual funds as transaction in mutual funds can be done only at the day-end NAV declared by the fund house.
Best ETFs based on 1-year performance
While only last one-year performance shall not be the sole criteria in picking up ETFs. Here we list some of them offering 1-year returns of more than 70 percent:
1. Motilal MoSt.Oswal Midcap 100 ETF
2. ICICI Pru Midcap Select ETF
3. Kotak NV 20 ETF
4. ICICI Prudential NV 20 ETF
5. Motilal Oswal Nasdaq 100 ETF
6. Nippon ETF Shariah BEES
7. Edelweiss ETF Banking