Exchange Traded Funds or ETFs are investment vehicles, quite similar to a Mutual Fund.
It is the ultimate bodyguard of an investor Quite efficient in protecting long-term investors from inflows and outflows of short-term investors.
ETFs are tools for financial security that track an Equity Index, commodity (Gold), or Bonds. They sometimes also mimic a basket of assets or indices.
The price at which you buy ETFs on the exchange is determined by market forces. This is akin to the ever-changing market prices of shares.
ETFs are more transparent than Mutual Funds. Since ETFs tracks an index t or Gold or certain type of Bonds, you already know what assets it will invest in. Mutual Funds do not disclose their full portfolios every day.
ETFs are also more liquid than Mutual Funds. This is because they are easily trade in the markets. You simply have to give a "Sell" order with your broker.
In an ETF, the fund manager does not have to actively manage the fund by researching, buying and selling regularly As a result, ETFs charge lower fees than Mutual Funds.
Whenever the Stocks or Bonds that the ETF has invested in issues dividends, the ETF to the investors.
How you can start with ETFs
Convinced about the potential of Exchange Traded Funds to add to your portfolio? Here's how you go about investing in ETFs
ETFs are basically created to behave the same way as specific Index or a collection of different securities.
But, before that, get your research done. ldentify which ETF to invest in amongst the four key types Index ETFs, BondLiquid ETFs, Gold ETFs and World indices ETF, Ensure your selection fits your overall investment needs.
Get your pre-requisites in order a Demat and a trading account. Otherwise, you wil not be able to purchase the ETF shares. Your Demat account is where the online ETF shares will be stored. The trading account, meanwhile, helps you buy the ETFs.
Now that you have everything in order, simply place a Buy order through your trading account. You can even do it online yourself if your broker offers the service. Some brokers even allow you to create an SIP, helping you stagger your investments.
Just like stocks, you willhave to pay an STT or Securities Transaction Tax while buying your ETFs. There are no other commissions.
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