What is ETF? Should I invest in it?
Dear Investor, Everyone knows What is ETF? Should I invest in it? to invest in Share Market and Mutual Funds but there are many things in which you can invest.
Today we will know in detail about ETF (Exchange Trader Fund) here, what is ETF and whether to invest in it or not, here we will give you complete information, so that you can decide very well that you should invest in it. Or not.
Friends, to understand ETF better, you understand a little about Mutual Funds, Active Fund and Index Fund, after that you can understand ETF better.
Many people give a little bit of money to a company and there is a Fund Manager who is an expert, he distributes the returns that he gets by investing in a good company according to him, it is called Mutual Fund.
Now know about Index fund, Index fund is like mutual fund but there is no Fund Manager in it, here the company invests your money directly in Index like Sensex, Nifty 50, it is called Index fund.
What is ETF
ETF means Exchange Traded Fund, it is like some Index fund, here there is no Active Fund Manager who likes Stock according to his own.
If there is an ETF of Sensex, then there is an ETF of Sexsex’s share in it.
Here Index is sensex and investing in sensex means investing in India’s biggest 30 companies.
The sectoral index includes all the shares in that sector. For example, Nifty Pharma will include all the list of companies in the pharma sector.
Now the question may be coming in your mind that if both Index fund and ETF invest in Index, then what is the need of ETF?
Now let us understand the difference between ETF and Index fund.
ETF is clear from its name that Exchange Traded Fund which you can buy directly from Exchanges like NSE and BSE.
Understand it in a way, if you buy shares with the help of Zerodha then it is from KITE and if you buy Mutual Funds then you buy from zerodha with the help of Coin.
Why is it like buying shares from Kite and mutual funds from Coin? This is because the shares are bought separately by the Stock Exchange and the Direct Mutual Funds company by mutual funds.
Means you can buy ETF from Stock Exchange only and not from anywhere else. It has become similar to some shares that if you want to buy Reliance’s shares, then you will have to buy directly from the market, not from Reliance company, you can buy shares from the company only at the time of IPO.
We told that you can buy direct shares from the company only at the time of IPO, similarly when the company’s ETF comes, then you can buy directly from the company, apart from this you will have to buy from Stock Exchange.
You should know that when you buy a share from Exchange, then you should also have a seller in front of you, only then you can buy it.
Just like shares, when you buy ETF, then you should sell in front. That is why before taking ETF, you have to see whether there is volume in it, whether you can sell the taken ETF again.
Sometimes you must have seen that due to upper circuit or lower circuit in the stock, you are not able to sell it, similarly the problem is in ETF, trading in ETF is less inside India, so you have to buy carefully.
Suppose a company is bringing its IPO worth 1000 crores and has kept a share price of ₹ 10, then 100 crore shares will be in the market of that company and people will trade them among themselves.
Here, like shares, Mutual Fund brings its own ETF of Index like Sensex and it also has listing like IPO and it is traded like normal share.
After the ETF is listed, their price goes up and down just like a stock.
If the company has 100 crore ETFs in the market, then they will remain the same, their size will be fixed, it is not like mutual funds.
When someone buys a Mutual Fund, their NAV i.e. in a way, the price remains the same throughout the day, but in ETF, if it is an ETF of Sensex, then it keeps increasing and decreasing like sensex.
One thing that is very positive about ETF is that if you think that any Index or Sectoral Index is going to rise in the coming time and today it is declining, then it
You can invest at low cost.
When you buy ETF, then you will see normal shares like you see inside your Zerodha Kite and you can see the ups and downs coming in it.
You can do trading and long term investment in ETF.
But if you look at investment, you can do it if you want, but there are very good shares available in the market, in which you can earn more profit than ETF and any other fund by investing well.
If you want more return than ETF, then you should invest in share because in ETF the amount of return you get in index is safe.
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