Invest In Tax Saving Mutual Funds Online
With the same constituent stock as the Index in the same ratio.
An ETF or Exchange- traded fund, trades like any other stock yet can be perceived as a mutual fund.
Though they may seem similar to mutual funds they provide investors with more bountiful benefits for investors.
ETFs usually cover a broad range of indexes providing the investor with diversified investment options.
HOW ETFS WORK
To the investor, ETFs provide a straight up, diversified, transparent, risk free, convenient and hassle free investment option in the market.
ETFs can be bought and sold on the intraday exchange market at a price that is usually very close to the price of the net asset value. This allows your investment to match the market rather than trying to beat it as is the case with picking individuals stocks.
ETFs can be purchased on margin and short sold giving it the flexibility of stock.
Though they can be traded like stock in the market, these sector- based ETFs are protected against the volatility that may affect the companies based in that sector.
ETFs do not require you to pay a management fee unlike other mutual funds which leads to lower expense ratios typically in the 0.25 per cent to 0.75 per cent range.
Investors are free to buy as low as one share and even trade in one share increments during the day trade.
ETF Investors are also privy to what securities are held within the ETF providing complete transparency that actively managed mutual funds lack.
Dividends that are received by the Scheme is reinvested into the Scheme but in some cases may be distributed to the investors.
Investors need not fill up any separate form to invest in an ETF. They can purchased from a broker or can be traded online.
WHEN THEY DONT
ETFs have only in recent years begun to emerge in the Indian market, yet some of the most successful ETFs can be found overseas.
Therein lies the first major hurdle of investing in todays most lucrative ETFs as international limitations exist on these ETFs that are mostly based out of the United States. Yet, specialized, region based ETFs like BIRC ETFs allow investments in indexes from Brazil, Russia and China.
Long term investors may not find it beneficial as an investment opportunity due to the transitory nature of the ETFs as they carry with it the risk of value loss as the indexes rise and fall during the days trade.
This has been a clear indication in both Stock and Commodity ETFS. On the other hand, Bond ETFs provide a much safer investment option for risk free investment.
ETFS AND THE INDIAN MARKET
The NSE allows investors to consider a range of ETF investment options in the form of : Equity Index ETFs These are funds whose price is based on the collective of capital market securities and allow investments in index funds such as NIFTY ETFs, NIFTY Junior ETFs etc.
Nifty BeES - NIFTYBEES -Junior Nifty BeES - JUNIORBEES Bank BeES - BANKBEES PSUBNKBEES SHARIABEES KOTAKPSUBK RELBANK QNIFTY
Gold ETFs - Gold ETFs are units representing physical gold and can be traded on the exchange like stock.
It has been found that Gold ETFs provide long term capital gains after a year and allows the investor to trade at near wholesale price as opposed to buying small amounts of physical gold at a premium.
A very good gold ETF to invest in, for example is SBI GETS which is registered with SEBI and / or permitted by SEBI from time to time.
SBI GETS is open to investors in India.
The investments could be made either directly with the underlying fund or through the secondary market. The scheme will also invest in money market instruments. The investment strategy would largely be active in nature.
The AMC shall endeavor that the returns of SBI Gold Fund will replicate the returns generated by the underlying ETF.
The SBI Gold ETF invests in physical gold, and at any time - it will have 90% – 100% of its investments in gold like any other stock.
Another important player is Kotak Gold ETF ( KGEFT), an Open ended Exchange Traded Fund. The investment objective of the scheme is to generate returns that are in line with the returns on investment in physical gold, subject to tracking error.
Another young but strong gold ETF name is MOSt Gold Shares, India's 1st gold ETF to convert ETF units to physical gold in quantities as low as 10 gms.
It was launched last March by the Motilal Oswal Asset Management Company ( MOAMC). Considering the Indian love for physical gold, this one is asure shot hit.
Other names in the Gold ETF space are :
Goldman Sachs Asset Management -GOLDBEES GOLDSHARE UTI Mutual Fund GOLDSHARE Kotak Mutual Fund - KOTAKGOLD Reliance Mutual Fund - RELGOLD Quantum Gold - QGOLDHALF SBI Mutual Fund - SBIGETS Axis Mutual Fund - AXISGOLD Birla Sun Life Gold ETF - BSLGOLDETF IDBI Mutual Fund - IDBIGOLD the total returns of securities as represented by the S& P CNX Nifty Index. It gives you the most diversified exposure at lowest at looking into the region based certain foreign markets and sectors.
Another interesting ETF is Kotak Nifty ETF . An Open ended Exchange Traded Fund. The investment objective of the scheme is to provide returns before expenses that closely correspond to the total returns of the S& P CNX Nifty subject, to tracking errors. Also worth looking at are some of the well known
BRIC funds:
BIK - SPDR S& P BRIC 40 ETF BKF - iShares MSCI BRIC Index ETF EEB - Claymore/ BNY Mellon BRIC ETF EWBK - Rydex Russell BRIC Equal Weight ETF Yet, despite there being these many options, ETFs have found few takers as veteran investors may find that ETFs do not suit their portfolio.
Under the Raj iv Gandhi Equity Savings Scheme ( RGESS), ETFs have become a lucrative investment option for first timers with the added tax benefits.
ETFs have thus far lacked any kind of actual marketing as most investors are unaware of their existence and are not sold in the market the way mutual funds are.
While currently unpopular amongst Indian investors, 2013 will see a change in trend as the surge in GOLD ETF investors looks to drive up the demand of ETFs across the board.Happy Investing!!
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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.
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Tax Saving Mutual Funds Online
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