If an investor wants cut the cake and be the first one to eat it too, then exchange traded fund (ETF) could be the only way to do so. Currently in India there are a total of sixteen ETFs and their total assets under management (AUM) stand at Rs 4,182 crore (September 2008). In the US, there are a total of 707 ETFs and their combined assets stands at $585.9 billion or Rs 27.5 lakh crore (Data from ICI, August 2008).
ETFs are open-ended exchange traded funds that are made in a way that they track specific indices and operate just like any other stock on the exchange combined with advantages of a mutual fund. While ETFs may seem very much similar to index funds, they are different in many ways. ETFs have now become the fastest growing mutual fund structure in the world and are making way for a new change in the financial markets.
India launched its first ETF ever in December 2001 with “Nifty BeES (Nifty Benchmark Exchange Traded Scheme) by Benchmark Mutual Fund, based on the S&P CNX Nifty Index.
By their nature ETFs are passive funds. But as not many would believe, passive fund management has a key role in the Indian financial markets.
How do you start trading In an ETF?
It’s quite simple. All you need to do is buy an ETF in exactly the same way you buy stocks. It is also possible to buy the fund from a mutual fund which handle such a scheme.
