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ETF in stock market: Types of ETFs, their benefits and top performing ETFs in India
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4 min read | Updated on May 28, 2024, 19:23 IST
SUMMARY
ETFs are a basket of investment securities traded like stocks on a stock exchange. They cater to different investment goals, tracking assets like commodities, bonds, or indices. Investors prefer ETFs for their trading flexibility, lower costs, tax advantages, and diversification benefits. Unlike mutual funds, ETFs can be traded throughout the day. ETFs are regulated by SEBI in India. Common types include index, fixed-income, commodity, and global ETFs.
What is an ETF in the stock market? How are ETFs different from Index funds?
An exchange-traded fund (ETF) is a basket of pooled investment securities that can be traded like individual stocks on a stock exchange. ETFs can be organised or designed to meet different investment objectives and strategies. They can track anything ranging from the price of a commodity to a diverse range of securities. Investors prefer ETFs for varied reasons like generating income, speculation, and protecting the risk factor in a portfolio.
In India, ETFs are regulated by the Securities and Exchange Board of India (SEBI). ETFs are placed under regulatory boards to ensure they meet certain standards and disclosures and protect investors.
Key advantages of ETFs
Investors prefer ETFs for many of their benefits. Some of the key advantages of ETFs are:
How ETFs differ from Index funds
Some of the key differences between ETFs and Index funds are tabled below:
| Particulars | ETF | Index Fund |
|---|---|---|
| Demat account | Required | Not required |
| SIP investment | Cannot invest through SIPs | Can invest in SIPs with a lock-in period |
| Expense ratio | Lower expense ratio | Higher expense ratio |
| Fund management | Provide flexible trading options | Managed by fund managers |
| Price discovery | Real time value of ETFs are available continuously | Price is updated at the end of the day |
Types of ETFs available in India
Some ETFs available to invest in India and their returns
| ETFs | 1-year Return (%) | 3-year Return (%) |
|---|---|---|
| Kotak PSU Bank ETF | 86.36 | 46.33 |
| SBI - ETF Nifty Next 50 | 66.22 | 23.53 |
| Mirae Asset Nifty Next 50 ETF | 66.06 | 23.46 |
| Motilal MOSt Oswal Midcap 100 ETF | 58.43 | 27.88 |
| ICICI Pru S&P BSE 500 ETF | 37.05 | 18.89 |
| ICICI Prudential Nifty ETF | 25.22 | 15.69 |
| Kotak Nifty ETF | 25.08 | 15.58 |
| Nippon ETF Sensex | 22.16 | 15.23 |
| Axis Gold ETF | 18.63 | 12.78 |
| Quantum Nifty ETFQ (G) | 25.13 | 15.64 |
The trading value of ETFs is based on the net asset value of the underlying stocks they represent. It can be regarded as a Mutual Fund that can be sold or bought at real-time prices that fluctuate throughout the day.
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