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What is an ETF? Is this the right time to invest in such a fund?

ETFs are available on stock exchanges and you can even buy a minimum of one ‘share’

By OLM Desk

What is an ETF? Is this the right time to invest in such a fund or should I wait? How does one sell or redeem ETF units?

Prakash Raj, Mangalore

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Exchange-traded funds (ETF) are much like index funds, but their structure is slightly different. They invest in all the scrips that lie in their benchmark index in exactly the same proportion. ETFs are available on stock exchanges and you can even buy a minimum of one ‘share’ (much like a ‘unit’ in MF parlance). ETFs are completely passively managed and there is no fund manager risk involved. Since equity markets are still low, these are good times to invest in ETFs if you have a plan to stay invested for at least the next three years. You can buy and sell ETFs only at the stock exchange where they are listed. You need a demat account because ETFs are available on stock exchanges.

 

olmdesk@outlookindia.com

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