ETF in Indian Stock Market- NIFTYBEES, BANKNIFTYBEES, GOLD BEES

 

An ETF can be called a group of stocks reflecting Index components such as NIFTY or Sensex. The net asset value of the group of stocks reflects the ETF price. In several manners, it is somewhat the same as mutual funds. They are Index Funds traded on exchanges just like stocks and are handled passively. While Mutual Funds help you create dominance by outperforming a benchmark in the market, ETFs track the related index and copy the returns. For ETF investments, you need to open a Demat and trading account.

How to choose ETF and Index Funds?

There are three aspects to consider when investing in ETFs:

·         Complete Expense Ratio: Minimum risk

·         Tracking Error: It is the deviancy between ETF return and index return.

·         Liquidity: Mutual funds are purchased and sold in the stock exchange, unlike mutual funds. If an ETF isn’t liquid, you may not be able to sell it.

Schemes of ETF:

·         Index ETF- It is the commonest ETF offering. It focuses on a specific market index such as Sensex, Nifty, BSE, etc. If you invest in an Index ETF, you will acquire an index return that the ETF will track.

·         Gold ETF- Gold ETF replicates the price of gold in the stock market and offers the same value at 24-carat physical gold.

·         Bank ETF- It is investing in a group of banking stocks

·         Liquid ETF: It is all about investing in a group of stopgap Government securities and short-term maturities.

Why should you invest in Exchange Traded Funds?

·         ETF is a better option if you want to get market or index returns for your money invested.

·         ETFs reduce or wipe out the weight of poor performers in their portfolios.

·         ETFs are not prone to unsystematic risk because they replicate the index.

·         The cost ratio of ETFs is lesser than their mutual fund equivalents.

·         ETFs are simpler to invest in than daily managed funds.

Some of the common ETFs are given below:

Nifty Bees: They are traded on National Stock Exchange and replicate the S&P CNX Nifty Index. They offer several benefits to their investors, such as diversification as you invest in 50 companies by buying just one unit. Every unit of Nifty Bees is 1/10^th value of the Nifty Index, and it can only be transacted through a Demat account. The expenses of Nifty Bees are just 0.80%. The returns here are somewhat the same as S&P CNF Nifty. They are highly liquid as they are traded on the capital market.

Bank Nifty Bees: They mainly invest in shares of banks and financial institutes. The dividend is added to the investment of the investor taxes as paid according to the tax slab. It comprises a group of banks that replicate the Nifty Bank Index. They are traded on the stock exchange, and you have high liquidity available.

Gold Bees: They are a passive investment option that replicates the returns of the domestic gold price. Gold ETFs purchase 99.5% pure physical gold and investors invest in the ETF units. They are extremely liquid and actively traded. Investors can largely profit from holding gold in their portfolios because of asset diversification.

Usually, ETFs track big cap indices such as BES-100, Nifty 50, or Sensex. Just choose an index, invest in an affordable ETF and enjoy the returns.

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