ETF Guide
Exchange Traded Funds (ETFs) combine diversification with real-time market trading.
ETFs typically track an index and trade like stocks on an exchange. They provide the diversification of mutual funds with the liquidity and pricing transparency of individual stocks.
How ETFs Work
1
ETF tracks an index, commodity, or sector
2
Units trade on stock exchanges like shares
3
Prices fluctuate during market hours
4
Generally follow passive investment strategies
Types of ETFs
Index ETFs
Gold/Commodity
Sector ETFs
International
Bond ETFs
Advantages
- Lower expense ratios compared to many MFs
- High transparency (holdings disclosed daily)
- Real-time liquidity
- Tax efficiency
- Ideal for long-term passive investing
Disadvantages
- Requires Demat and trading account
- Brokerage charges apply
- Liquidity concerns in low-volume ETFs
- No active fund management
- Tracking error risk
Who Should Invest?
Cost-conscious investors
Passive index investors
Long-term disciplined investors
Investors comfortable with trading