What Is An Exchange Traded Fund?

By Author: Shashank Pawar
Total Articles: 13
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An ETF or Exchange traded fund is a type of common stock which is quite different from standard mutual funds trade in terms of a stock exchange. ETF units are typically bought and sold via a certified mutual fund advisor of a registered stock exchange. ETF units that are listed and the net asset value varies according to market movements. As ETF units are listed only in the stock exchange, investment with exchange traded fund is quite different from that of buying and selling any general open-end equity fund. Here, an investor is able to purchase many units as they wish without facing any restrictions from the stock exchange. Therefore, ETFs funds are those that track indexes like BSE Sensex or CNX Nifty and more. The ETF units track the yield as well as the return of their native index. ETFs offer higher daily liquidity along with lower fees compared to Mutual Funds schemes, hence, making them a more profitable alternative for investors.

How does an investment advisor help in choosing a scheme?

When ...
... investors choose a scheme for themselves, they do that based on the performance of the scheme. However, most investors might forget to consider the past performance of the scheme, which is essential. Evaluation of a particular scheme depends on various attributes such as funding risk, investment universe, scheme objective, and more. Hence, an investor should have the required time, effort, and expertise to understand the nuances and features of a scheme. They should also be able to compare and analyze different available options. An investment advisor is trained as well as qualified for this job.

Furthermore, it is essential to invest in the most suitable or appropriate scheme that would match the current situation if the investor. Even though the investors know their situation the best, having a good advisor is beneficial. They can always provide investors with a different perspective and help them double their profits. An advisor also helps in monitoring the portfolio and characteristics of the scheme once the portfolio has been constructed.

What is the benefit of investing in gold mutual funds?

A gold ETF that focuses on tracking the physical gold price. Gold ETFs are passive investment channels and are based on domestic gold prices. In India, most people buy gold in ornament form that has an inevitable wastage and making component, which is generally more than ten percent of the bill value. However, this wastage component can be avoided by investing in gold ETFs.

In gold ETFs, the gold is bought in an electronic form. The investor can buy as well as sell their gold ETFs just as they trade in stocks. When the investor wants to redeem their gold ETF, they will receive the equivalent cash amount. The investors who wish to trade in gold ETFs must have a broker as well as a dematerialized account so that they can invest conveniently without facing any hassle.

In addition to that, gold ETF trading provides for direct gold pricing, hence offering complete transparency. Furthermore, due to it's incredible and unique creation mechanism and structure, the gold EFTs have lower expenses in comparison to investments in physical gold.