Skip to main content

Exchange Traded Funds (ETFs)

 

 

ETFs provide a real time price discovery for investors and relegate the investment effort to a click of a button. Additionally, the cost of investment is far reduced, and hence they provide an inherent growth advantage

 

EXCHANGE-traded funds (ETFs), as the emerging mutual product fund segment in India, have positively redefined the value proposition for investors. Despite an increasing overlap of the ETF concept with exchange traded products, the crucial difference is that, ETFs are mutual funds that are available only through exclusive medium of stock exchanges. Thus in contrast to a regular fund, which can be brought or redeemed off the counter or at the exchange, ETFs are available only through the latter.


   The underlying asset of an ETF can be any tradable asset: be it stock, commodity, bonds and currency. Currently, in the Indian context, only stock ETFs and gold ETFs have received the regulator and the investor acceptability.


   ETFs provide a real time price discovery for investors and relegate the investment effort to a click of a button. Additionally, the cost of investment is far reduced, and therefore provides an inherent growth advantage vis-à-vis other funds. Additionally, many ETFs also provide a passive exposure to assets that otherwise would be out of reach for most investors. Albeit, even actively managed funds are readily available through ETFs.


   ETFs, since they are traded on the stock exchange, are subject to the same cost which are applicable to share trading, i.e,: brokerage, STT, demat cost (if any) etc.


   In turn, ETF units are only managed by the funds, (actively or passively) and as such invite a lower 'expense ratio' from asset management companies (AMCs). Therefore, the cost of purchasing ETF units is directly dependent on the frequency of entry and exit, as well as the size of acquisition. On the other hand, the entire corpus of a regular mutual fund (most of the time) invites the same cost, irrespective of the size of individual holdings.


   The convenience of acquiring, holding and divesting ETFs are also a key feature that make them stand out from the rest. Since ETFs are traded like the stock, the acquisition, valuation and disposal of the investment is real time. Moreover, the price discovery largely tends to be precise, rather than on the end of day basis. This facilitates the investor to utilise the price variations in the underlying asset in a relatively sharp detail and time. Investors can also carry out other features of stock investment in ETFs that is otherwise not feasible in a regular fund. Namely, day trade, short sell, limit order and a potentiality to buy and sell a stock in a single unit.


   In the present market context, wherein the market has approached its 2008 peak level, the ease and accessibility of ETFs may come in handy in managing the emerging investment environment.


   For instance, increasing liquidity and a largely hawkish interest rate regime have had a variegated effect on the equity markets. The Sensex is trading at around 16X forward PE. This valuation is significantly cheaper than the previous peak of 2008 but still looks stretched from the historical average. Nevertheless, the sharp emergence of Indian equities, and the resultant FII induced liquidity glut, have kept the market momentum going. Also, with the Indian economy maintaining its high growth rate, global flows may continue to find their way into the Indian equities market.


   In this backdrop, investors can (subject to the market prognosis) actively allocate corpus between an index ETF and a gold ETF. Additionally, investors can execute their own 'flexible' SIP by self-ascertaining the time and scale of investment depending on the market condition.Also, a potent case for investment in gold ETF remains. A volatile geopolitical setup, an increasingly chary global economy and the rising demand for gold jewellery in India and China are some of the reasons that make investment in gold ETFs a lucrative investment opportunity.

 

Popular posts from this blog

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...

Birla Sun Life ’95 Fund Dividend

 Dividend in Birla Sun Life '95 Fund (An Open ended Balanced Scheme) with record date of September 22, 2015 and the details are mentioned below: Scheme / Plan / Option Dividend Rate ( per unit # on face value of .10/- per unit) NAV as on September 15, 2015 ( ) Birla Sun Life '95 Fund - Regular Plan Dividend Option 7.50/- 142.06/- 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 investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call ------------------------------------...

Lump Sum or SIP?

Invest Mutual Fund Online     You have a lump sum in hand and you wish to invest in equity funds. However, you have heard a lot of talk about investing in equity funds through Systematic Investment Plans (SIPs) because they help average costs, ensure you do not ill-time the market, and help you invest in small sums, besides giving you many other advantages. So, should you invest the money you have in hand in one go, or let it remain in your bank account and then do an SIP? There is no harm in investing a lump sum amount. For all you know, compounding, over the long term, could work better with lump sum. However, make sure you fulfill all of these three criteria if you want to invest in one go. Else, SIP is the way to go. #1: You invest for the long term According to past data, ideally, if you have a time frame of 12 years or more, you can consider lump sum investing (provided you satisfy the other two conditions that follow). So, what is the sanctity behind 12 years? Is it because only...

Mutual Fund Review: Reliance Regular Savings Balanced

Reliance Regular Savings Balanced fund has shown great resilience during market crash After a shaky start, this fund has established itself as a strong contender in this space. In the past three years it has ridden the market well by not only delivering during the market run-ups but also displaying resilience during the crash. In 2008, it witnessed the second lowest fall among its category and last year it was amongst the top three performers with a return of 76 per cent (category average: 61%).   The poor underperformance in 2006 can well be credited to the low equity allocation of the fund, which stood at just over 10 per cent for only four months that year. Though the fund has the leeway to go up to 75 per cent in equity, it has never touched that limit. In fact, it has exceeded 70 per cent in just five months in its entire history. During the crash of 2008, the fund managers had no problem going right down to 54 per cent (equity exposure). Fund managers Omprakash Kukian and A...

Why credit history is critical?

Will you need a loan to buy a car or a house? Do you know why some people get their loans sanctioned quickly without any hassle, whereas others find that their approval is delayed or their application is rejected? If you want a loan, you will need to work to build a solid credit history because this can have a bearing on the ease with which you get loans. Read on to learn more about what is a credit history and how to build a good credit score. What is a credit history? Your credit history is a way of tracking your credit behaviour and habits — basically it shows how disciplined and regular you are when it comes to repaying your dues on loans that you have taken. It will show a complete record of your past borrowing and repayment record including details about any late payments or if you have defaulted on a loan. This track record is readily accessible to lenders and is used by them to when reviewing your loan application. Borrowers who have historically had a bad record of managing...
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