All about exchange-traded funds

3 min read

Facts:

Exchange-Traded Fund (ETF):

  • An ETF is a fund that comprises a group of stocks that are listed on an exchange and can be simply traded like any other listed security.
  • Usually,ETFs are passive funds where the fund manager doesn’t select stocks on your behalf.The fund simply copies an index and endeavors to accurately reflect its performance.
  • The ETFs trading value is based on the net asset value of the underlying stocks that it represents.
  • The ETF is aimed at helping speed up the government’s disinvestment programme.

Benefits of ETF:

  • Low Cost – The price of the ETF is based on the net asset value of the underlying stocks.Hence,the fund management fee of an ETF is much lower than that of a normal mutual fund scheme.
  • Liquidity – The traditional mutual funds are only priced at the end of the day.But ETFs can be bought and sold at any time throughout the trading day.
  • Low Risk:ETF allows investors to avoid the risk of poor security selection by the fund manager, while offering a diversified investment portfolio.

Additional information:

About Bharat-22 ETF:

  • Bharat 22 is an ETF that will track the performance of 22 stocks of Central Public Sector Enterprises(CPSE), Public Sector Banks(PSB’s ) and strategic holding of SUUTI(Specified Undertaking of Unit Trust of India).
  • The 22 stocks are diversified across six sectors such as(a) basic materials (b) energy (c)finance (d) FMCG (e) industrials and (f) utilities.
  • Bharat-22 ETF is managed by the ICICI Prudential AMC while Asia Index is the index provider.