Introduction.
Hello reader today I’m going to share about ETF, its features, and how it works so read completely about ETF so you will know everything about ETF. Let’s start if you want to invest in gold but don’t want to own it or store it so you can buy gold ETF if you don’t want to buy any stock directly but need exposure to stock you can go for ETF stock, in this ways you can invest in any ETF I will also discuss types of ETF.
What Is ETF?
An electronic traded fund is basket of investment of stock, bond, gold etc. It is traded on the stock exchange just like individual stock, it has a low expense ratio other than fund. It is best diversification strategy, exposing several class of asset at once.
ETF is the best investment scheme because in this fund investor will get high liquidity and less volatility. There is also a less risk than other asset class. It is always being manged by great people having high experience along with high degree.
How does it work?
First, the fund provider forms the fund and tracks their performance, and sells it to the investor. It is underlying assets which is own by fund provider. The portion of an ETF own by shareholder , but they don’t own the underlying assets in the fund.
ETF are traded through out of the day just like individual stocks, these funds always being managed by finacial institution.
Investors in an ETF that tracks a stock index may get lump dividend payments or reinvestments for the index’s constituent firms.
Types Of ETF?
1- Gold ETF – Gold ETF gives exposure to physical gold and digital gold there are various types of ETF gold available in market if any one don’t buy gold direct so they can buy gold etf it is the best option to invest in gold without owning or storing it.
2- Equity ETF – It is also gives exposure to the stocks of company if you don’t buy stock directly so you can invest in equity ETF. It also gives best diversification strategy of investment.
3- Bond ETF – Bond ETF holds several types of govt and corporate bonds In one basket so if you want to invest in bonds ETF it’s goods to invest in bond ETF.
4- Index ETFs- Track market indices (e.g., Nifty 50, Nifty 100, Nifty next 50, sensex).
5- Thematic ETFs- It gives exposure to AI , power secror, telecom sector, etc.
Benifit of ETF
Diversification: ETF is the best diversification strategy for investment because it gives several types of asset exposure at once.
Liquidity: ETFs are bought and sold throughout the day just like stocks.
Lower Expense Ratio: ETF having lower expense ratio than mutual funds or any other assets class.
Tax Efficiency: There is less tax compared to mutual funds.
Conclusion:-
As I discussed about ETF investment as a beginner you can start small for long-term always try to invest for long-term because it will create a good wealth when you invest for longer period of time. And I mention above there is less volatility with low risk and also in ETF there is expense ratio is also very low in compare to other fund. And most important you don’t need to invest by own because your fund will will be mange by fund house so what you have to do is select any good etf and invest in it.