What are ETFs and why should you invest in them?
Live MintAn exchange traded fund, or ETF, refers to a basket of securities that works like an index mutual fund apart from the fact that the form can be traded on a stock exchange just as a listed share. Since ETFs can be bought and sold during the day, their price fluctuates throughout the trading day unlike mutual funds which have one closing price at the end of the day. When an investor wants to tie the earnings of his investment to those of the broader index such as Nifty50 or a sectoral index such as Nifty IT then one of the most convenient and safe forms of investing is to opt for exchange traded funds. ETFs and index funds Index funds track benchmark index and are priced at the end of the trading day based on the NAV of underlying securities. To be able to trade in ETFs, investors need to have a demat account whereas no demat account is needed to invest in index funds.
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