What are ETF funds?

Exchange-Traded Funds, or commonly known as ETFs, are a basket of stocks that reflects the composition of an Index. These funds track indexes such as CNX Nifty or BSE Sensex, etc. In contrast to Mutual Funds, it is just like any familiar stock we discover on a stock exchange. The ETF units are generally bought and sold from a recognised stock exchange’s registered broker. As per market movements, the NAV and the units of ETF funds listed in stock exchanges differ. Just like any other open-ended equity fund, they are not merely bought and sold. An investor can also buy as many units as she/he chooses to do with no restriction through the exchange.

However, units of an ETF are listed in the stock exchange, mainly so when you buy units/shares of an ETF, you are buying shares/units of a portfolio that tracks the yield and return of its native index. The radical difference between ETFs and alternative types of index funds is that when it comes to ETF investing, these funds don’t try to outperform their corresponding index, but purely replicate the performance of the Index.

In conclusion, ETF funds share attributes of both mutual funds and shares. They help investors with limited knowledge gain broad exposure of the stock market. ETFs don’t try to beat the market; they just try to be the market. Compared to Mutual Fund schemes, ETFs ordinarily have higher daily liquidity and lower fees making them a fair alternative for individual investors. It is a tempting option for investors with limited expertise in the stock market.

Below are some advantages of investing in ETF:

• These funds provide investors with exposure to broad segments of the stock market.
• They enable customers to build customized investment portfolios consistent with their financial needs, risk tolerance, and investment horizon.
What are Gold ETFs?

There are various ways to invest in gold. Investors either prefer purchasing the metal or opt for gold funds. Gold ETF is a type of exchange-traded fund that tracks the price of domestic physical gold.

These are passive investment instruments that are connected with gold prices and invest in gold bullion. In our country, people usually maintain gold in ornament form, which includes a specific making and wastage factor (occasionally larger than 10% of the bill value). This is excluded when investing in a Gold Fund.

When you buy gold ETFs, you are purchasing gold in an electronic form. Following the pattern of how you would trade in stocks, you can buy and sell gold in ETFs too. When you redeem Gold ETF, you receive the cash equivalent to the physical gold. A DEMAT account and a broker helps in the trading of gold ETFs, and this makes a remarkably convenient method of investing in gold electronically.

Furthermore, there is complete transparency on the properties of a Gold ETF. Also, ETFs have much lower expenses in comparison with physical gold investments.

Investors concerned in a more liquid and low-cost entry for investing in gold can ward off the hassles of keeping a physical gold, such as the cost of storage, insurance, transaction fees, etc. can consider exchange-traded funds as an alternative.

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I'm 32 Years Old, Marketing Manager. I provides investment guidance in Mutual Funds & other investment options.

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