What is exchange traded fund and how they are invested. How E.T.F is differ from mutual funds, how E.T.F are structured and what are the benefits of it. Also know how to invest in E.T.F can reduce your investment risk.
Exchange Traded Fund ( E.T.F ).
Exchange Traded Funds are actually index funds, which are bought and sold just like stocks in the stock exchange.
E.T.F i.e., the global Exchange Traded Fund is a very popular investment instrument among retail investors and institutional investors. We can say that this is a cheap investment instrument.
because the charges in this fund are generally lower than other funds. You can buy them from your broker or directly from the fund house. Where mutual funds are taken at the end of the day at the N.A.V. only E.T.F trading hours can be bought and sold at the actual prices of trading at that time. That is, day trading is also possible in the E.T.F.
Structure of Exchange Traded Fund :
Structure of E.T.F is based on its index. Nifty or Sensex index for example.
Consider reading : What is Sensex and how it is calculated in simple language.
In the Sensex E.T.F, 30 stocks will be invested according to their market capitalization. as they have significance in the Sensex. Similarly, Nifty E.T.F are also invested in Nifty shares. Similarly, there may be Gold E.T.F like Industry based index such as Pharma Index, Banking Index or Mid Cap, Small Cap Index or Commodity-based E.T.F.
Benefits of Exchange Traded Fund :
Buying is easier to sell. Because the stocks included in the Stock Exchange Index (Sensex or Nifty etc.) are included in different industries. there is a diversification in the index E.T.F.
which reduces the risk of investment. E.T.F are convenient, you can invest in fifty stocks of Sensex and fifty shares of Nifty together. In the same way, you can not buy the actual gold and buy its E.T.F which is more convenient. The E.T.F can be invested in a small amount. You can also take SIP in the E.T.F.
For those who do not have much information about the stock market. or want to avoid getting more risk in the stock market. investing in mutual funds and E.T.F is also a low-risk investing. E.T.F offers diversification to your investment.