Exchange Traded Funds (ETFs): Types and Features
ETFs are simple investment products that combine the flexibility of stock investment and the simplic...
30 Apr, 2019
Some important factors that investors should look at while investing in ETFs are collated for your reference.
You can go through these to be able to make a smart choice for yourself.
You can buy and sell Gold, Index, Banking or International ETFs online through your reliancesmartmoney.com all in one investment account.
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A few Comparisons for ETFs and other investment options to help you make the investment of your choice:
ETF |
MUTUAL FUNDS |
ETFs are passive by design |
Mutual Funds investments may be either actively or passively managed |
Passive ETF mutual funds are designed to mimic an index focusing on equities or commodities of a basket of an asset class |
In actively managed funds, a team of fund managers select securities with the intention of outperforming the index |
In an efficient market, where it is difficult to outperform the index, fund managers often suggest investing in passive funds |
Active funds are popular for exceeding in the general market and thus show higher growth potential |
ETFs that do not track indexes publish their full portfolios on a daily basis, providing ongoing portfolio transparency |
Actively managed mutual funds publish their portfolios only after a lengthy time lag, as transparency is actually likely to be detrimental to their business prospects |
|
EXCHANGE TRADED FUND (ETF) |
INDEX FUNDS |
Pricing and Trading |
ETF prices are 'Live' / 'Realtime' on the stock exchange and can be traded like individual stocks |
The Net Asset Value (NAV) is determined at the end of the trading day |
Transaction Cost/Fees |
ETF's have low expense ratio and transaction costs are similar to an individual stock traded on the exchange |
There are few transaction costs and the index fund charge Management expenses on the fund |
Tracking Error |
ETF's don't have to keep funds aside for liquidity, hence they are able to track an index more closely |
Index fund managers have to keep certain percentage of funds aside to ensure liquidity to buyers and sellers. Hence, they are less effective in tracking an index |
Portfolio Disclosure |
ETF's disclose their holdings on a daily basis |
Index funds disclose their holdings on a periodic basis |
|
GOLD ETF |
PHYSICAL GOLD |
Quantity to buy/sell |
Available in small quantities, hence are more affordable |
Available in standard denomination, which requires large investments |
Mode of storage |
Available in dematerialised form, they can be stored electronically. Hence, they also eliminate the risk of theft |
Normally available in bars they need to be stored in lockers or safety vaults |
Convenience |
They are held electronically hence physical handling is eliminated |
In buying and selling they need to be moved physically from one place to another |
Pricing |
Pricing is done as per international standards and is always transparent |
Prices are never uniform, and differ from one jeweler to other |
Purity |
Fund house ensures the quality of the same |
Always comes with a question of purity in mind |
Charges |
Have ETF management fee as well as brokerage charges associated with each transaction |
Other than the charges for delivery, no other charges are involved in case of physical gold |
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