An exchange-traded fund (ETF) is a type of fund whose investment objective is to achieve the same return as a particular market index. An ETF is similar to an index fund in the sense that it will primarily invest in the securities of companies that are included in a selected market index.
ETF Asset Classes
ETFs can be of the following underlying asset classes
1. Equity: ETFs investing in Equity Indices e.g. Nifty BeEs
2. Bonds : ETFs that invest in Debt e.g. Liquid BeEs
3. Commodities: ETFs that invest in Commodities e.g. Gold ETFs
Features of ETFs
• Immediate exposure to an entire or specific market.
• Correlation to the benchmark close to 1.
• Very low total expense ratio: 0.45% on average.
• No subscription/redemption fee.
• No maturity date.
• Equally accessible both to institutional and retail investors.
• Broad range of asset classes.
Advantages of ETFs
• Allows you to implement asset allocation or portfolio investment decision as Single Investment which is,
• Easier to track.
• Small Investment amount.
• Asset Classes are much simpler to track than individual stocks since you do not have to worry about,
• Quality of management.
• Accounting frauds.
• Off Balance sheet derivative losses.
• Individual Credit Quality.
• High quality and well diversified portfolio.
• Generates income from frozen account.
Gold Exchange Traded Funds-ETFs
• Open-ended MF schemes backed by units of physical gold.
• Follow a passive investment strategy.
• Buys & holds gold on behalf of investors without actively managing it.
• Aims to give returns as close as possible, post-expenses, to that given for gold as a commodity.
• Investor can buy & sell quickly at market price, making them highly liquid assets.
• Intra-day trading is possible with an ETF, but not with open-ended mutual funds.
Current Scenario - Diversification with Gold
• Hedge against inflation.
• Hedge against a declining dollar: Strong Negative Correlation.
• Safe haven in times of geopolitical and financial market instability.
• Commodity based on gold's supply and demand fundamentals.
• Store of value.
• Portfolio diversifier; gold can act as portfolio insurance.
• Due to rise in demand of gold, gold prices have increased thus causing a rally in stocks of gold mining companies.
• Due to lower inflation & deflation the input costs have come down thereby providing operating cash flows.
• Share prices of gold mining companies appreciate at twice the gold price.
• Since there is a negative correlation between the equity markets and gold it can act as hedge against the down fall in equity markets.
Advantages Gold ETFs
• ETFs allow investment in gold in small denominations, which makes it easier for the retail investor to participate.
• Quick and convenient dealing through demat account.
• No storage and security issue for investors.
• Taxation of Mutual Fund.
• Can be traded on stock exchange like buying / selling a stock.
If you want to buy shares then open demat account in india
ETF Asset Classes
ETFs can be of the following underlying asset classes
1. Equity: ETFs investing in Equity Indices e.g. Nifty BeEs
2. Bonds : ETFs that invest in Debt e.g. Liquid BeEs
3. Commodities: ETFs that invest in Commodities e.g. Gold ETFs
Features of ETFs
• Immediate exposure to an entire or specific market.
• Correlation to the benchmark close to 1.
• Very low total expense ratio: 0.45% on average.
• No subscription/redemption fee.
• No maturity date.
• Equally accessible both to institutional and retail investors.
• Broad range of asset classes.
Advantages of ETFs
• Allows you to implement asset allocation or portfolio investment decision as Single Investment which is,
• Easier to track.
• Small Investment amount.
• Asset Classes are much simpler to track than individual stocks since you do not have to worry about,
• Quality of management.
• Accounting frauds.
• Off Balance sheet derivative losses.
• Individual Credit Quality.
• High quality and well diversified portfolio.
• Generates income from frozen account.
Gold Exchange Traded Funds-ETFs
• Open-ended MF schemes backed by units of physical gold.
• Follow a passive investment strategy.
• Buys & holds gold on behalf of investors without actively managing it.
• Aims to give returns as close as possible, post-expenses, to that given for gold as a commodity.
• Investor can buy & sell quickly at market price, making them highly liquid assets.
• Intra-day trading is possible with an ETF, but not with open-ended mutual funds.
Current Scenario - Diversification with Gold
• Hedge against inflation.
• Hedge against a declining dollar: Strong Negative Correlation.
• Safe haven in times of geopolitical and financial market instability.
• Commodity based on gold's supply and demand fundamentals.
• Store of value.
• Portfolio diversifier; gold can act as portfolio insurance.
• Due to rise in demand of gold, gold prices have increased thus causing a rally in stocks of gold mining companies.
• Due to lower inflation & deflation the input costs have come down thereby providing operating cash flows.
• Share prices of gold mining companies appreciate at twice the gold price.
• Since there is a negative correlation between the equity markets and gold it can act as hedge against the down fall in equity markets.
Advantages Gold ETFs
• ETFs allow investment in gold in small denominations, which makes it easier for the retail investor to participate.
• Quick and convenient dealing through demat account.
• No storage and security issue for investors.
• Taxation of Mutual Fund.
• Can be traded on stock exchange like buying / selling a stock.
If you want to buy shares then open demat account in india
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