ETF can become a support in a falling market, this formula will make you big money! – etf investment rule in india and benefits of etf for retail investors sector funds tuta
The stock market has not been stable for the last four months. There is an outcry among investors. Most of the new portfolios created in the last one to one and a half years have incurred losses. Now investors are afraid to place bets in stocks, especially retail investors.
Even in this decline, do retail investors have any option to invest money in the sector instead of buying stocks directly, so that if the market falls from here too, the loss is reduced? At present, ETF is an option where investors can invest keeping the sectors in mind. Let us know the advantages and disadvantages of ETF.
What is ETF?
To understand in simple way, ETF is an investment option. Investments are made in the stock market through exchange traded funds (ETF). Investment is made in a set of shares through ETF. It usually tracks a particular index.
Just like stocks, ETFs are bought and sold on stock exchanges. ETFs can be bought and sold at any time during the trading period. In the last few years, ETFs are gradually becoming popular among retail investors. The reason for this is its excellent returns. Some ETFs have given good returns in recent times.
Investments are made in indices, commodities and bonds through ETFs. According to Amfi, ETFs are those funds which track indices like CNX Nifty or BSE Sensex. There are fund managers for every ETF, so that the investor does not have to buy or sell shares. Investors have to invest only in ETFs.
When to invest in ETFs?
If you invest in ETFs according to a specific strategy, you will be able to earn more profits than others. For those investing in ETFs, it is most important to choose this time. You can get trapped by investing money in ETF without knowledge. Therefore, the easiest way to invest in ETF is ‘Buy on Dips’, that is, whenever there is a decline in the market or the ETF index, you invest money in ETF.
Let us know why investing in ETF is beneficial compared to mutual funds.
Just like you buy and sell shares, you can buy and sell EFT in the same way.
– You can keep an eye on ETFs while trading in the stock market. Investment is more transparent in this.
– ETFs can be sold easily, the way shares are sold.
Investments can be made in different sectors through ETFs.
– There is no income tax on dividends received from ETFs.
Compared to mutual funds, there is a lower expense ratio on investing in ETFs.
Investors do not have to pay any exit load on ETF withdrawal.
Investors can choose ETF according to their risk.
1. Bond ETF: By investing in bond ETF the investor gets monthly income. Government, corporate, and municipal bonds (sometimes known as municipal bonds) can be included in this category.
2. Stock Based ETF: In stock-based ETFs, there are many types of stocks within one ETF, according to the performance of which investors get returns.
3. Sector Based ETF: Industry or sector ETF is a fund that tracks the performance of a particular industry or sector. As an example, firms operating in the energy industry would be included in an ETF for that sector. There are options in ETFs like IT, PSU, CPSE. Apart from this, ETFs of IT sector also exist.
4. Commodity Based ETF: Gold ETF is quite popular among investors. Commodity ETFs invest in commodities like crude oil or gold. Big investors definitely keep some part of gold ETF in their portfolio.
5. Currency Based ETF: Investment vehicles that follow the performance of currency pairings are called currency ETFs. Currency ETFs have many uses. A country’s political and economic trends can be used to predict currency value. An ETF is also available for Bitcoin.
6. Inverse ETF: Inverse ETFs are designed to profit from stock drops by shorting equities. Shorting involves selling a stock with the belief that its price will go down and then buying it later at a lower price.
(Note: Before investing in stock market, mutual fund, ETF, take the help of a financial advisor)
