ETF funds

What is ETF and how it works

An ETF is an Exchange Traded Fund, which unlike regular Mutual Funds trades like a common stock on a stock what is ETF and how it works.

The units of an ETF are usually bought and sold through a registered broker of a recognised stock exchange. The units of an ETF are listed in stock exchanges and the NAV varies as per market movements.

Since units of an ETF are listed in the stock exchange only, they are not bought and sold like any normal open end equity fund, An investor can buy as many units as she wishes without any restriction through the exchange

On a beige surface, multi-colored stickers for notes with the word etf exchange traded funds Premium Photo

In the simple terms, ETFs are funds that track indexes such as CNX Nifty or BSE Sensex, etc. When you buy shares/units of an ETF, you are buying shares/units of a portfolio that tracks the yield and return of its native index.

The main difference between of ETFs fund and other types of index funds is that ETFs don’t try to outperform their corresponding index, but simply replicate the performance of the Index. They don’t try to beat the market, they try to be the market. what is ETF and how it works

ETFs typically have higher daily liquidity and lower fees than mutual fund scheme  making them an attractive alternative for individual investors.

Is ETF a good investment?

ETFs are a low cost means to gain exposure to the stock market. They offer liquidity and real time settlement as they are listed on an exchange and trade like stocks. ETFs are a low risk option as they replicate a stock index, offering diversification as opposed to investing in few stocks of your choice. what is ETF and how it works

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