These days we come across a word "ETF" alot.

So thought of sharing my views on this product.

Its generally said that one should accumulate Nifty BeES(which is an ETF) for long term as it helps in gaining the profits by the increase in the value of Nifty. As value of Nifty/Sensex changes and these changes(increase/decrease) are because of the changes in the values of lot many securities which are listed on these stock exchanges,so one can have these ETF's as a part of their portfolio.

ETF's are exchange traded funds.These ETF's are actually not traded that heavily as they trade in US markets.One will find less volumes in ETF's, as trading in ETF's is not popular in Indian market.

ETF's have a lot of similarity with Mutual funds.As through mutual funds we can have exposure to a basket of securities,similarly in ETF's also we can have exposure to a basket of securities .So it is like trading a basket of securities as compared to one stock share as we do in normal share trading.

Similarity in ETF's and Mutual Funds.

1. They allow the investor/trader to have exposure to a basket of securities.

2. They are of two types - open ended and close ended.

3. They both track an index or a sector.

Difference in ETF's and Mutual Funds.

1. ETF's are traded on stock exchange and so the price keeps on changing throughout the day like any other stock price.
Mutual funds are traded on the NAV price(Net Asset Value) and it is declared once daily.

2. As ETF's are traded on exchanges so they can be bought on margin depending upon the margin/exposure provided by the brokerage house, through which you are trading.
Mutual funds can't be bought on margins.

3. ETF's can be sold short(means you can sell these ETF's without holding them as you do for shorting any kind of stock shares).
Mutual funds can't be sold short.

4. In ETF's direct buying and selling is done on exchange so very less or barely minimal or no interaction is there between the buyer and the seller.
In Mutual funds there is an interaction with the AMC(Asset management company).

5. Sometimes there is difference in the price which is prevailing in the stock market and its NAV and this can be used for arbitrage.

The different ETF's which are available in India are

1.Gold BeES
2.Liquid BeES
3.Nifty BeES
4.Bank BeES
5.Kotak Sensex ETF
5.Kotak PSU ETF
6.Kotak Gold ETF
7.Quantum Gold ETF - Growth
8.Quantum Index Fund - Growth
9.Relaince Banking ETF
10.PSU Bank BeES
11.ICICI SENSEX Prudential ETF
12.S&P CNX NIFTY UTI National Depository Receipt Scheme
13.UTI Gold ETF
14.Junior BeES
15.PSU Bank BeES

ETF's are very good for those investors/traders who want to have exposure of any particular sector or index and who wants to do the trading on their own on daily basis.So it is just like trading mutual funds on stock exchanges. So you can have benefit of both trading and sector/index exposure.

Happy Investing.