Exchange Traded Funds (ETF)

ETF or Exchange Traded Funds are securities that are traded as stocks on the stock exchange. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets. Most ETFs track an index.

They offer the advantages of mutual funds while being traded as stocks in the secondary market and can be bought and sold like any other stock. Individual investors having a demat account can trade in such funds.

ETF funds are available in different forms and can be selected as per the requirements. These include ETF bond funds, ETF Gold funds and many more forms.

The prices at which they trade are roughly in line with the net asset values of their underlying portfolios. Eg. Benchmark Goldbees fund replicates the NAV as 1 gram of Gold, hence you can purchase one gram of gold in demat form by buying 1 unit of this fund and paying the brokerage like any other equity purchase. This charge would be much lesser than the packing and bill charges that you pay to a goldsmith for purchase of a 1 gram gold coin.ETF funds are low-cost securities flexible than mutual funds as they charge lower annual expenses than index mutual funds. They first came into existence in the USA in 1993.

ETF in India listings include gold, silver and currencies. ETF funds are a new alternative to investing in mutual funds as they also minimize the risk involved in the investment in other finance solutions. Exchange traded fund lists have been increasing in India since their inception.

Samir Kunvaria

http://futurefinances.blogspot.com/