What are ETFs/ Exchange Traded Funds ?
ETFs are open ended passively managed mutual funds that are
traded on exchange with an objective of providing returns as that of a
particular market index. Based on the broader market ETFs are of following
types.
ETFs
Advantages of ETFs:
- Easier to track
- High quality and well diversified portfolio.
- Convenience of trading & Real Time NAV
- Available in lower denomination
- Dividends received are tax-free.
- Investments are exempt from wealth tax
ETFs combine the benefits of : Mutual Funds (Diversification,
Regulated, Open ended) and Stocks (Bought and Sold during the day, Transparent,
Liquid).
Users of ETF:
Due to unique structure of ETFs, all types of investors whether
retail or institutional, long term or short term, can use it to their advantage.
-
Investors
-
Hedgers
-
Arbitragers
Structure & Working of ETFs:
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