An investment portfolio reflects the personality of an individual. If you are an aggressive investor, a sizeable chunk of your portfolio is invested in Equity-linked investments. If you are a conservative investor, Exchange Traded Funds (ETFs) are a good way of adding strength to your portfolio.
What are ETFs
Exchange Traded Funds are listed on stock exchanges and trade like shares. Like an Index Fund, an ETF represents a basket of Stocks that reflect an index such as the NSE Nifty or the BSE Sensex.
Cost of transaction cheap
The expense ratio or the money charged to manage an Exchange Traded Fund is less than that of Mutual Funds. You pay regular commission to the broker that you pay on a regular stock market transaction.
Benefits of Stock
Like a share, you can buy a single share in an ETF, use short selling, margin finance or stock lending benefits or simply trade in it.
How they help
You can take an exposure to diversified Equity represented by frontline indices like the Sensex and Nifty or you could opt for a sector ETF. The value fluctuates through the day. Effectively, you get the benefit of diversifying your risk like a Mutual Fund. At the same time, there is flexibility similar to that of an individual stock.