ETF Investing

  An Index Fund is an open-ended mutual fund that endeavours to replicate the performance of it’s underlying index (subject to expense ratio and tracking error). In other words, it’s portfolio tends to mirror it’s underlying index constituents by holding the securities in the similar proportion as their weightage in that index.

ETFs are also open-ended funds and can also be traded like stocks on the exchange(s).

For example, there may be an ETF on Nifty or S&P BSE Sensex, whose portfolio will be exactly the same as the index. It will hold all the securities in the same weightage as in the index.

As opposed to a conventional mutual fund, ETF is listed and traded like shares on a stock exchange through a trading account. Just like a stock, an ETF has a ticker symbol and follows the same settlement cycle.

It has an indicative real-time NAV (market price) as compared to only a single end-of-day NAV for traditional mutual fund schemes. The indicative NAV of an ETF changes in tandem with the change in its benchmark index value.

Diversify Across Asset Classes

One can easily create a diversified portfolio using ETFs across asset classes and the best part is that one need not be an expert to be able to achieve that. All one needs is to buy the different ETFs and let each one replicate its respective market index or asset classes.

Equities

Replicating the composition and performance of an equity index. (e.g. Nifty 50, Dow Jones, Nifty Bank)

Commodities

Tracking the domestic price of commodity. (e.g. gold)

Fixed income

Earning regular income by investing in a basket of bonds (e.g. long-term government bonds or money market instruments and CBLO)

With ETFs, one will find it is easy to move money between specific asset classes such as equity, commodities and fixed income.

Don’t Overlook Costs

The cost of running an ETF is usually lower than a conventional mutual fund. This is mainly because unlike the other mutual funds, the fund manager doesn't actively manage the ETF, and thus takes a smaller fee. This helps to keep the costs down. Operational and client servicing costs are lower as they are handled by the demat service provider or the broking house. Further, there is no exit load levied by an ETF.

Having said that, one must realise that brokerage will be payable for buying/selling through their Demat account (brokerage charges similar to any other stocks) and STT @0.001% will be payable on delivery based trades and @0.025% wil be payable on intra-day based trades. STT is applicable only at the time of ETF redemptions of equity oriented scheme.

Alternative to Futures

Speculative investors, who want to bet on the performance of the index, love ETFs for their flexibility and convenience. ETFs can be purchased in smaller sizes. They also don't require special documentation, special accounts, rollover costs or margin. Furthermore, some ETFs cover benchmarks where there are no futures contracts

ETFs can be short-sold intra day and squared off like a stock. Additionally, ETFs can be short-sold for a longer duration by borrowing ETF units in Securities Lending and Borrowing (SLB) scheme.

Therefore, because of ETFs ability to be traded on real-time basis, Sumeet may want to prefer them over futures as his objective of investing in futures can be achieved with ETFs,albeit with greater flexibility and convenience.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

When placing your order in Mutual Funds, kindly select "YES" when prompted if you are assisted. You will need to input my Employee Unique Identification Number. EUIN: E484653 and ARN 259045.

WhatsApp, 📞 9845211825, inbox here for hassle-free online investing in Mutual Funds.

Prajval Madhav Uchil 

Mutual Fund Distributor. 

EUIN: E484653 l ARN 259045.

#PrajvalMFD #Mangalore #Udupi #Manipal #Kasaragod #Karnataka #India #Investing #Wealth #Money #Growth #Mutualfunds #Equity #Debtfunds #Bonds #Commodities #MultiAsset #InternationalEquityFunds #PersonalFinance #MutualFundsSahiHai #SochaSamjhaRisk #Deshkarenivesh #InformedInvesting #2024goals

Investing Links

1) Dear User, Welcome to KFintech Investor Services. Please use the below link to download our app. Don't forget to rate us https://onelink.to/8z5qey -KFintech

2) CAMS App download. Link for Android: https://play.google.com/store/apps/details?id=com.KCamsApp&hl=en For iOS: https://itunes.apple.com/in/app/mycams/id877565416?mt=8 -myCAMS