Exchange Traded Funds (ETFs)

Exchange Traded Fund (ETF) is an investment vehicle that invests funds pooled by investors to track an index, a commodity or a basket of assets. It is similar to an index fund in the sense that its portfolio reflects the index it tracks. But, unlike an index fund, the units of the ETF are listed and traded in demat form on a stock exchange and their price changes continuously to reflect changes in the index or commodity prices.

ETFs provide the diversification benefits of an index fund as well as the facility to sell or buy at real-time prices, even one unit of the fund. Since an ETF is a passively managed portfolio, its expense ratios are typically lower than that of a mutual fund scheme.

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