Are ETFs only for stocks?
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- Updated On:19-May-2021
- Replies:1
Short Answer
ETFs are a financial instrument made to track an underlying asset and provide similar returns based on the performance of the underlying. ETFs are listed on stock exchanges which make it easier to buy and sell at desired prices. ETFs are not only limited to stocks but cover a wide range of investment avenues like Commodities, Bonds, etc.
Detailed Answer
What is an ETF?
An ETF or an Exchange Traded Fund or a Fund that tracks a particular asset such as an index, commodity, sector, etc. It is managed by a Fund manager who makes sure that the ETF is accurately tracking the underlying asset, which can consist of Stocks, Commodities, Index, etc. ETFs are listed on stock exchanges hence an individual can buy and sell an ETF on the Stock exchange at any point of time during the market hours i.e (9:15 to 3:30).
Are ETFs only for Stocks?
In short No! ETFs are not limited to stocks or Indices. They can be widely diversified to various asset classes like Debt, commodity, Bonds, etc. Let's look at some of the types of ETFs available in India.
- Index ETF- Index ETFs are funds that track particular Indices, for example, Nifty50 Index, Nifty Mid Cap Index, etc. These are mainly equity-focused ETFs that track the real-time movement of such Indexes.
- Commodity ETFs- Commodity ETFs include ETFs that track an underlying commodity for example Gold, Silver, Aluminium, etc. SBI GoldETF is an example of a Commodity ETF.
- Debt ETF- Debt ETF does not contain any equity component in them. It is focused on Debt instruments like Government Securities, Bonds, etc. The underlying asset in these ETFs is Government Bonds, Treasury bills. These provide a fixed rate of return and the probability of capital gain is very small in these ETFs. Bharat Bond is an example of a Debt ETF.
- International ETFs- International ETFs are another equity-related ETF that is common in India as it gives exposure to foreign markets. International ETFs usually track Foreign Indices such as NASDAQ 100 or S&P 500. The main advantage of buying an international ETF is, one does not need to maintain a separate brokerage account with any foreign broker to buy international shares. Motilal Oswal NASDAQ 100 ETF is an example of an International ETF listed on the NSE & BSE.
Conclusion
By now it should be clear that ETFs can be of various types tracking numerous asset classes. ETFs provide a range of options for the investor to choose from. The charges on ETFs is also low as there are no heavy overhead expenses like salaries, high transaction charges, etc. This is due to the fact that most ETFs are passively managed funds that track the underlying asset.
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Discussion (0)
Exchange-Traded Funds or ETFs are an investment tool that tracks particular securities like Equity, Commodity, Bonds, etc. ETFs are available for many categories from which one can choose from. These are listed on Stock Exchanges (NSE & BSE) hence there is ample liquidity and one can easily buy and sell these at their desired price during market hours. Some ETFs available for investment in Indian markets are Equity ETFs, Debt ETFs, etc.
ETFs (Exchange Traded Funds) and Mutual Funds are similar investment vehicles that provide the investors various features. Both have their benefits and shortcomings. ETFs are a good option for passive investors who want to invest in a particular Index or Sector without much rebalancing. On the other hand, Mutual Funds are a better option for active investors who are more active with their investments. One can switch between funds according to their current strategies.
The Mirae Asset NYSE FANG Plus ETF Fund is a good option for Investors who want foreign exposure. The Equity allocation is very concentrated to just 10 stocks which makes this ETF very volatile and risky. This ETF consists of the top 10 stocks in their respective sectors mostly TECH, like Amazon, Netflix. Facebook, etc. Hence Investors with high-risk tolerance and a long time period should consider this fund.
ETF is an investment instrument that tracks a group of securities from a particular asset class and performs according to it. It is managed by a Fund manager who makes sure that the ETF tracks the underlying asset accurately. ETFs are listed on the Stock Exchanges therefore one can buy & sell them within the market hours at their desired prices.
ETFs are investment instruments that are listed on stock exchanges that offer investors to get exposure to a variety of asset classes. ETFs can be of different types tracking a particular asset class like Index, Commodity, and a particular sector. There are some changes in an ETF that include the Expense ratio and some other fixed charges charged by brokers, SEBI, etc.
Arbitrage Funds are mutual funds with an objective to profit from inefficiency in the price of securities in two different markets. We look at their taxation, meaning and difference with liquid funds in this post. The fund invests in equity and debt instruments.
Debt funds are mutual funds managed by professionals with their money invested in high-rated securities. Just like you lend money to the bank through fixed deposit or while purchasing the bond, a certificate is issued by the borrower. Debt funds also work on the similar concept.
Upstox is a great discount stock broker that provides excellent features at a lower cost. Some of the benefits of using Upstox are margin against shares, free equity delivery, ultra-low brokerage, bracket order, and cover order availability, mutual without any commission fee, excellent trading platforms, and more.
DP charges apply if you sell shares from your demat account. This is an income source for depositories (CDSL or NSDL) as well as its Depository participants (Stock brokers). DP charges are applicable only one time per scrip in a single day irrespective of the quantity you actually sell.
Nifty is an index comprising of the top 50 companies in terms of the market capitalization of the NSE (National Stock Exchange). Bank Nifty, on the other hand, comprises 12 top banking stocks of the NSE. These indices are an attractive option for investors as they track the performance of the most valuable companies of the NSE. Know if you can purchase one share in these indices.