ETF funds for Long Term Investors

Exchange Traded Fund is a pool of investment that can invest in stocks, commodities, currencies, and other options. They can be traded on a stock exchange like common stock, unlike regular Mutual Funds. This means that they can be bought and sold throughout the trading day. Exchange traded funds are can be either actively or passively managed schemes, that pool the financial resources of various investors and use them to purchase various tradable monetary assets such as shares, debt securities such as bonds, and derivatives.

ETF funds aim to track a particular market index such as CNX Nifty or BSE Sensex, etc. ETFs, help you to buy or sell a basket of assets without having to specifically go through all of them individually. One of the prime advantages of exchange traded funds is that they can be traded at the investor’s convenience. The trading of Exchange Traded Funds can take place at any time the market is open. An investor can buy the shares in the morning and sell them in the evening. Furthermore, an investor can buy as many units as they wish to, without any restriction through the exchange.

The ETF units are listed in stock exchanges and are usually bought and sold through a registered broker of a recognized stock exchange. When an investor buys shares or units of an ETF, generally, they are buying shares or units of a portfolio that tracks the yield and return of its native index. Additionally, the NAV varies according to the market movements.

The primary difference between ETF funds and index funds of other types is that ETFs do not try to outperform the index, rather, replicate the performance of the market index. In simpler terms, exchange traded funds try to be the market instead of attempting to beat the market. Typically, ETFs are lower fees than Mutual Fund schemes and are perfectly suited for investors who want to create a diversified portfolio. This could be a superior alternative for individual investors with limited expertise in the stock market but are vying to enter the market. Exchange traded funds can also help the individual investors who want to beat market inflation and get returns over a long-term investment horizon.

Considering staying invested over a long-term investment horizon can help the investor gain a dual advantage in the matter. The first and the foremost is that, when the investor stays the course, the short-term market fluctuation evens out, thus mitigating volatility and helping gain a good average. Secondly, the Power of Compounding can significantly help to generate returns by the scheme.

For individual investors, it is crucial to ignore the short-term price movements and stay focused on the long-term. It is equally important for an investor to stay invested through the down periods so that they can benefit when the market is high. Precisely why, Mutual Fund distributors and experts routinely give the advice to invest for the long run when it comes to stepping closer towards financial goals.

Essentially, it is imperative for an investor to understand, is their investment objective, risk appetite and time horizon when it comes to stepping closer to their financial goals.

Hello, My name is Bhagath Varma.Currently I am working in one of the leading organization as Business Development Manager. I like to read and write articles on finance, Industrial machinery, new technology and healthy food topics.