Skip to main content

Fchange Traded Funds (ETFs) offer varied options for investors

THERE are many exchange traded funds (ETFs) that are available in India now. The maximum attention is focussed on funds that track the Sensex or the Nifty and gold ETF.

The availability of varying options has opened up a large number of opportunities for investors to get a different kind of exposure for their portfolios. Investors need to put in some effort to ensure they are making the best out of the situation.
Basics: A mutual fund has a net asset value (NAV), which forms the basis for transactions that take place in the fund. The price at which the units of the fund are sold and purchased by the investor depends upon the NAV.

There is a restriction that is present in this system because the individual will find that there is only one price at which they can transact even though there might have been a lot of changes that are taking place throughout the day in the value of the fund.

This makes the closing value the only relevant value. On the other hand, ETFs are like shares that an investor can trade during the day so as to take advantage of the multiple values that are possible.

All the factors here are like mutual funds except for the trading part, whereby they are available on the stock exchange.

Most ETFs are index funds so they are passively managed funds. Here are some examples of the variations that are visible in the Indian market.
Slightly active: Most of the ETFs are passively managed funds, but one can still see that in some of them there is a slight bit of active management that is present. A majority portion of the fund assets still maintains its passive management feature, as this will track the index.

So, for example, a fund where 80 per cent to 90 per cent is in the same proportion as the Sensex while the remaining 10 per cent to 20 per cent is actively managed will be this kind of fund.

This means that the overall proportion of the holdings in the portfolio will be different from what the index might suggest and hence this would make the fund different.

This would mean that there could be a slight chance of an outperformance or underperformance from the fund depending on how the actively managed part performs. Independent index: There could be an ETF that is modelled on the basis of a separate index that is created by a mutual fund.

There can be different ways in which this could be done. One would be where the components of the index are different from the leading indices present in the market, while the other example could be where the components are similar to the leading indices but their weights are different.

This might seem to be similar to the option above, but there is a difference here because in the former the actual decision about the portfolio holdings for the active management part is dependent upon the fund manager.

In this case the function depends upon the composition of the index that has specified features and the portfolio matches this differently constructed index.
Sectors: The ETF exposure can also extend to various sectoral indices that form the basis for the ETF portfolio composition.

What this means is that there can be tracking of the index that comprises of a specific sectors such as autos or pharma or banking as per the availability and investor interest.

This by a simple action ensures that there is a wider choice in terms of selection options for the investor because they are able to ensure that they have an exposure where they feel there is a better chance of growth. There will also be a higher risk to this investment.
Foreign exposure: ETFs can now also ensure a foreign exposure for the portfolio because slowly ETF based on foreign indices are also making their way in the Indian market.

At present, the choice is limited but as the situation changes there will be a larger choice as the options in front of the investor increases. This will mean that the investor will also be able to trade on the value of a variety of foreign indices just like they do with the local indices using the ETF route.

 

Popular posts from this blog

NPS - How much to Invest?

  Though the deduction offered under Section 80CCD (1B) is `50,000 , it is not advisable to put the entire amount at one go. It is best to stagger your investments across several months, much like the SIP strategy in a mutual fund. However, don't make too many small contributions. There is a transaction charge of 0.25% or `20 (whichever is higher) on every contribution. If you invest `500-1,000 every month, you pay `20 per contribution, which works out to 2-4%. Invest at least `5,000-10,000 at one go. Remember, at most `2,500-5,000 of this will go into equities if you have chosen the maximum 50% allocation to stocks. The rest will flow into corporate bonds and gilt funds as per your desired allocation. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver ...

Mirae Asset India-China Consumption Fund

Mirae Asset India-China Consumption Fund     Mirae Asset India-China Consumption Fund is the first of its kind fund that focuses on the consumption theme in Asia's two biggest economies India and China. It offers a flavor of both Indian and Chinese consumer stocks in a single portfolio $ . We are delighted to share that we have declared a dividend as below.   Scheme/Plan Quantum of Dividend (per unit) NAV of Dividend option as on March 11, 2015 (per unit) Record Date Face Value (per unit) Mirae Asset India -China Consumption Fund – Regular Plan – Dividend Option Rs. 2.00/- per unit (subject to availability of distributable surplus as on the record date) Rs. 18.302/- Wednesday, March 18, 2015 * Rs.10.00/- Mirae Asset India-China Consumption Fund is the first of its kind fund that focuses on the consumption theme in Asia's two biggest economies India and China. It offers a flavor of both Indian and Chinese consumer stocks in a single por...

Shriram Transport Finance FD

Shriram Transport Finance Co. Ltd (STFC) is self explanatory. They have decided to revise the Interest rates on "Shriram Unnati" Fixed Deposit w.e.f. 1 st April'15 . The revised interest rates applicable will be as given below:   Tenor Rate (p.a.)* 12 months 9.00% 24 months 9.50% 36 months 9.75% 48 months 9.75% 60 months 9.75%   *Senior citizens will get an additional rate of 0.50% per annum. This is only an advanced information, enabling us to inform our investors and advise them to take maximum advantage of current interest rates applicable till 31 st March,15.   Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under S...

EPF or NPS - Why not both?

  In the Budget, Jaitley also empowered the corporate employees to choose between the EPF and the NPS. The details are awaited but this could be a big change in the way Indians save for retirement. However, your employer must be ready to shift to the NPS as well. Should you shift to NPS if it is allowed? Experts say you should opt for both . NPS offered by corporates now is additional to the EPF , so the same structure should continue in future also. However, much will depend on the rules and whether employers and the Labour Ministry will embrace the change.     Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by inv...

Comparison of Tax Saving Funds

Comparison of Tax Saving Funds As on 11.02.2015             Scheme Name 1M  3M  6M  1Y  [%]              Rank [%]              Rank [%]              Rank [%]              Rank Reliance Tax Saver (ELSS) Fund(G) 0.99   51/59 7.52   33/57 14.34   22/55 88.54   1/54 IDBI Equity Advantage Fund-Reg(G) 2.44   30/59 10.1   17/57 25.85   1/55 85.12   2/54 Axis LT Equity Fund(G) 5.26   4/59 11.8   3/57 19.44   9/55 72.16   3/54 SBI TAX Advantage Fund-I(G) 6.28   2/59 10.28   15/57 8.08   48/55 71.13   4/54 SBI Tax advantage Fund-II(G) 4.44   6/59 6.44   43/57 9.52   42/55 68.87   5/54 ICICI Pru R.I.G.H.T Fund(G) 3.47   12/59 9.52   21/57 17.44   11/55 67.21   7/54 Birla SL Tax Relief '96(G) 3.19   17/59 ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now