Exchange Traded Funds (ETFs)

Definition: An Exchange Traded Fund (ETF) is a security that tracks an index, commodity, bonds, or a basket of assets like an index fund and is traded in the securities market.
Key Characteristics:
- ETFs track indices such as Sensex, Nifty, etc.
- When you buy units of an ETF, you actually buy units of a portfolio that tracks the performance of the index.
- ETFs reflect the performance of the index they track.
Comparison with Mutual Funds:
- ETFs trade like a common stock on the stock exchange.
- The price of an ETF changes as per the trading in the market takes place.
- The trading value of an ETF depends on the net asset value of the underlying assets that it represents.
- ETFs generally have higher daily liquidity and lower fees than mutual fund schemes.