The recent 2 FFO of CPSE ETF and its good performance have made investors look at this category. They are curious to know about these funds and their modalities. The ETF Exchange traded funds have already existed in India but still, since many investors do not know how they work and what kind of funds are available, they refrain from investing in these. This post will try to explain ETFs & are they connected with MFs. So here we go with ETF Exchange Traded Funds Vs Mutual Funds.
Investopedia defines – An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.
ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does. This is because it trades like a stock. So the rate is determined like a share’s price through demand & Supply mechanism.
An ETF is a basket of stocks that reflects the composition of an Index, like S&P CNX Nifty or BSE Sensex. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Think of it as a Mutual Fund that you can buy and sell in real-time at a price that changes throughout the day.
Reliance MF has the maximum number of funds. The reason is they took over Goldman Sach MF which only had ETF funds. CPSE which is the second largest ETF by Assets is also managed by Reliance MF.
Comparison with MFs
So here is picture to let you know the details of ETF Exchange Traded Funds Vs Mutual Funds
ETF is gaining prominence especially as the markets are in a bull run phase. Many new investors are investing now looking at the possible gains in the portfolio. Please feel free to ask in the comments section below. If you think this article was helpful to understand this concept, must share it with your friends. Use the social media buttons near you to share.