Understanding Exchange Traded Funds (ETFs) Benefits, Types, and Associated Risks
Exchange-Traded Funds (ETF) have gained significant popularity in the Indian market as a diversified investment option. ETF provide investors with the benefits of both stocks and mutual funds, combining the flexibility of stock trading with the diversification and professional management associated with mutual funds. This article aims to provide a detailed overview of ETF, highlighting their benefits, various types available in the Indian market, and the associated risks investors should be aware of. Benefits of ETF: a. Diversification: ETF offer investors exposure to a broad range of securities, such as stocks, bonds, commodities, or indices. This diversification reduces the risk associated with investing in a single security and helps spread the investment across various asset classes. b. Lower Costs: ETF generally have lower expense ratios compared to actively managed mutual funds. This cost efficiency is primarily due to their passive investment strategy, which aims to replica...