Index Exchange Traded Funds are essentially Index Funds that are listed and traded on capital markets (exchanges) like equities. An ETF is a basket of stocks that reflects the composition of an Index, like S&P CNX Nifty or BSE Sensex. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Think of it as a Mutual Fund that you can buy and sell in real-time at a price that changes throughout the day.
ETF are kind of passively managed fund as it doesn't really need to have a dedicated fund manager , or financial analysts as its job is to replicate investment as per weight-age of underlying security. / index Liquidity is provided by listing on the capital markets. Rtturns provided are quite high and can be in range of 12-18% CAGR over 10+years period and comparatively much safer than Direct Equity Investment, more cost effective than actively managed funds. In my future post I will try and explain what does Index means and provide historical analysis of kind returns provided by index over past 30 years of its existence in India.
ETF are kind of passively managed fund as it doesn't really need to have a dedicated fund manager , or financial analysts as its job is to replicate investment as per weight-age of underlying security. / index Liquidity is provided by listing on the capital markets. Rtturns provided are quite high and can be in range of 12-18% CAGR over 10+years period and comparatively much safer than Direct Equity Investment, more cost effective than actively managed funds. In my future post I will try and explain what does Index means and provide historical analysis of kind returns provided by index over past 30 years of its existence in India.
Nifty BEES by Benmark mutual fund is an example of index ETF. There are some similar ETF from UTI, Kotak etc. In near future we may see launch of Index funds with underlying securities of Hong Kong Stock Exchange (Hang Seng), MSCI Index etc.
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