An exchange traded fund (ETF), as the name implies trades on an exchange just like any other stock but tracks an index or a commodity like an index fund. As far as trading is concerned, it’s like a stock from the perspective of an investor. An investor can short, use margins provided by depository participants/brokerages.
From functional point of view it combines the characteristics of both open and closed ended funds. Since it is traded on an exchange NAV/price changes at every moment during the trade hours (of course subjected to the liquidity in the fund) similar to a closed ended fund.
But the fund size is not fixed like an open ended fund. Units are created and redeemed based on demand and supply. From the investment perspective it’s like an index fund. It tracks a predefined bucket of stocks or an index or a commodity.
The expense ratios for ETFs are very less compared to normal open ended funds as much research is not required and requires minimal management.
History of ETFs:
In 1989 was when the first ETF showed up in Canada as the Toronto Index Participation Fund (TIP 35) and then moving forward to 1993 is when the first ETF appeared in the United States as the Standard & Poor’s 500 Depository Receipts (SPDRs). Asia followed suit in 1999 with its first ETF, the Hong Kong Tracker Fund. Finally was Europe’s Euro STOXX 50 market ETF launched in 2001 as was in India in the same time.
The below is a list of a few Indian ETFs.
Bank BeES – Tracks CNX Bank Index
Junior BeES – Tracks Nifty Junior Index
ICICI SENSEX Prudential Exchange Traded Fund – Tracks Sensex
For more funds list please visit the below link.
Sathish Emmadi
Sathish Emmadi is a co-founder & editor at Lastbull.com. He is presently working in IT for one of the world’s top mutual fund companies. Handled multiple projects in BFSI (Banking,Financial Services and Insurance) domain. An Engineering Graduate from NITW.
Related posts:
- Difference between Over The Counter (OTC) and Exchange Traded Markets
- What are Index Funds
- What are Closed Ended Funds
- Calculation of Mutual fund Expense Ratio (TER)
- Mutual Fund performance calculations
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