While many investors have similar outlooks, no two are exactly alike. Due to the unique structure of ETFs, all types of investors, whether retail or institutional, long-term or short-term, can use it to their advantage without being at a disadvantage to others. They allow long-term investors to diversify their portfolio at one shot at low cost and insulate them from short-term trading activity due to the unique “in-kind” creation / redemption process. They provide liquidity for investors with a shorter-term horizon as they can trade intra-day and can have quotes near NAV during the course of trading day. As initial investment is low, retail investors find it simple and convenient to buy / sell. They facilitate FIIs, Institutions and Mutual Funds to have easy asset allocation, hedging, equitising cash at a low cost. They enable arbitrageurs to carry out arbitrage between the Cash and the Futures markets at low impact cost.

ETFs provide exposure to an index or a basket of securities that trade on the exchange like a single stock. They offer a number of advantages over traditional open-ended index funds as follows :

• While redemptions of Index fund units takes place at a fixed NAV price (usually end of day), ETFs offer the convenience of intra-day purchase and sale on the Exchange, to take advantage of the prevailing price, which is close to the actual NAV of the scheme at any point in time.

• They provide investors a fund that closely tracks the performance of an index throughout the day with the ability to buy/sell at any time, whereby trading opportunities that arise during a day may be better utilized.

• They are low cost.

• Unlike listed closed-ended funds, which trade at substantial premia or more frequently at discounts to NAV, ETFs are structured in a manner which allows Authorized Participants and Large Institutions to create new units and redeem outstanding units directly with the fund, thereby ensuring that ETFs trade close to their actual NAVs.

• ETFs are like any other index fund, wherein, subscription / redemption of units work on the concept of exchange with underlying securities instead of cash (for large deals).

• Since an ETF is listed on an Exchange, costs of distribution are much lower and the reach is wider. These savings in cost are passed on to the investors in the form of lower costs. Further, the structure helps reduce collection, disbursement and other processing charges.

• ETFs protect long-term investors from inflows and outflows of short-term investors. This is because the fund does not incur extra transaction cost for buying/selling the index shares due to frequent subscriptions and redemptions.

• Tracking error, which is divergence between the NAV of the ETF and the underlying Index, is generally observed to be low as compared to a normal index fund due to lower expenses and the unique in-kind creation / redemption process.

• ETFs are highly flexible and can be used as a tool for gaining instant exposure to the equity markets, equitising cash or for arbitraging between the cash and futures market.

The first ETF in India, “Nifty BeEs (Nifty Benchmark Exchange Traded Scheme) based on S&P CNX Nifty, was launched in January 2002 by Benchmark Mutual Fund. It may be bought and sold like any other stock on NSE. Its symbol on NSE is “NIFTYBEES”.

 

advantages of demat account benefits of demat account demat account demat account advantages advantage of demat account phosphorus etf sbi etf nav the advantahes and risks of trading on a demat account benefit of demat account benefits of etfs in India disadvantage of holding stock in demat form etf demat account demerits of demat account demat accounts that allow trading low price stocks demat account etf is DEMAT required for ETF? demat account benefits dmat acc charges in india advantage can I purchase exchange traded mutual funds without having demat account disadvantages of icici demat account disadvantages of demat account demat account advantages and disadvantages disadvantage of demat trading drawbacks of icici encashing demat account SBI Demat ETF Account www demataccount com MERIT OF DEMAT ACCOUNT lowest price for demat account icici etf account how to open ETF account how to buy etf hdfc demat hdfcmfetf hdfc etf nav HDFC Demat brokerage structure etfs phosphorus how to buy etf using sbi demat account ETF phosphorus ETF merit demerit etf advantages what is demat account www hdfcmfetfs com advantages of holding ETF compared to a single stock benefits and advantages ofdemat account best demat account in india advantages of a demat account advantage of icici demat account over sbi demat account advantages and disadvantages of demat account best demat account advantage disadvantage of SBI demat account ICICI EFT cash brokerage how does investor benefits from demat services icici direct pledge nifty etf icici direct etf fee structure Icici Direct charges on ETF icici demat disadvantage ICICI cash brokerage etf icici brokerage on etf ICICI BROKERAGE FOR NIFTYBEES advantage of ICICI DEMAT account ICICIEFT merit & demerit of icici demat margin money deducted for ETF in demat account? advantage of demat lowest demat account holding charges in india lowest demat account charges long term and short term objectives of demat account locking preriod for sbi etf is it mandatory to hold a demat account for ETF advantage of dmat account icici brokerage charges on exchange traded fund icici brokerage charges on etf funds how much does it cost to open a demat account how to open ETF account in ICICI how much time it takes to encash ETF in india how to open demat account from UAE how to invest inetf by sbi demat? how to buy S&P CNX 500 etf exchange traded fund internet trading account how to buy nifty stocks? icici demat account how to buy NIFTY stocks in icici demat account how to buy nifty in hdfc demat account how to open ETF account in SBI? how to open etf in india how to order ETF on hdfc demat account I have icici demat account how can I buy the nifty how to use sbi demat account How much cost for opening demat account how to use demat account to buy etf How to trade in ETF india how to trade in etf if i have a demat account how to purchase ETF witout demat account how to purchase etf from demat how much does a demat account cost hdfc etf trading icici direct sbi nifty etf what is demat accounts advantage and disadvantage of demat account what are the benefits of demat account what are the advantages of demat account What are EXCHANGE TRADED FUNDS? india 

Related posts:

1. What are Exchange Traded Funds (ETF)?
2. PAN as common ID for all mutual funds from 2 Feb 08
3. Demat facility at UAE Exchange
4. Investing in MFs? Tips
5. How to select an online broker