ETFs (Exchange-Traded Funds) are simple to use but powerful investment tools.
Here's how they work:
1. Pooling of Money
Just like mutual funds, ETFs collect money from many investors.
2. Investing in a Basket of Assets
That pooled money is used to buy a group of securities — like stocks, bonds, or commodities. For example, a Nifty 50 ETF buys shares of all 50 companies in the Nifty 50 index.
3. Listed on Stock Exchanges
ETFs are traded on stock exchanges (like NSE or BSE) just like regular shares. You can buy or sell ETF units during market hours at real-time prices.
4. Tracking an Index or Sector
Most ETFs follow a specific index or theme. If the index goes up, the ETF’s value usually goes up too — and vice versa.
Related Articles
Can I place limit orders when buying ETFs?
Yes, When purchasing ETFs, you have the option to place limit orders, which allow you to set a specific maximum price you are willing to pay. Your order will only be executed if the market price reaches your designated limit or a more favorable ...
How do ETFs differ from stocks?
ETFs (Exchange-Traded Funds) and stocks both trade on stock exchanges, but they are quite different in structure and purpose. Ownership Buying a stock means owning a share of a single company. Buying an ETF means owning a collection of securities, ...
Are ETFs actively or passively managed?
Exchange-Traded Funds (ETFs) can be both actively and passively managed, depending on how they are structured. Passively managed ETFs are the most common. These funds aim to replicate the performance of a specific index, such as the Nifty 50 or ...
What are the different types of ETFs available in India?
In India, Exchange Traded Funds (ETFs) have gained popularity as an investment option due to their low cost and ease of trading on stock exchanges. ETFs are investment funds that track indices, commodities, or other assets and trade like stocks. The ...
Do ETFs have entry or exit loads like mutual funds?
ETFs usually do not charge any entry load or exit load when you buy or sell share. ETFs are designed to be passively managed and traded on exchanges, which eliminates the need for entry or exit loads.