Exchange Traded Fund

An Exchange Traded Fund is a collected fund that operates very similar to a mutual fund. Let’s suppose you want to invest in an ETF, it can be bought and sold intraday at different prices. ETF offers a low-cost ratio and more liquidity as compared to mutual funds. To invest in ETF, one must have a Demat account and a trading account with a stockbroker. ETF holds various investments, such as commodities, stocks, or a blend of investments. It lowers the risk as it offers diversification within a portfolio. Some Benefits of ETFs

• Lower brokerage charges or lower expense ratio
• Exposure to many stocks across various industries
• Lesser risk due to diversification
• It focuses on targeted industries.

Types of ETFs

• Equity ETFs

Equity ETFs include a basket of stocks or shares that target a single industry or sector. You can choose ETFs from large companies, small businesses, or shares from a specific country. Its aim is to provide an investor with the diversification of a particular industry.

• Bond ETFs

Also known as fixed-income ETFs, bond ETFs provide a steady return at a lower risk. They might include corporate bonds, government bonds, and municipal bonds. These ETFs would be beneficial for investors seeking high liquidity while taking a low risk and with a low-cost investment.

• Commodity ETFs

Commodity ETFs are a great way to further diversify your portfolio. These ETFs are invested in commodities, including gold, silver, agricultural commodities, and crude oil. Some of the factors one must know before investing in commodity ETFs:

• Commodity ETFs focus on either investment that is related to futuristic contracts or on a single commodity held in physical storage.
• These ETFs are invested in popular commodities such as precious metals (silver, gold), natural resources, and agricultural commodities.
• Its aim is to monitor the performance of a wide commodity index that consists of a variety of single commodities.
• Currency ETFs

A currency ETF provides investors with great exposure to the currency market through diversification in the portfolio of currencies. It helps in tracking a single currency or a basket of currencies.

• Industry/Sector ETFs

Sector ETFs include a particular sector or industry (for example, the technology sector, energy sector, financial sector, etc.). Industry ETFs have become popular with investors because of their higher daily liquidity and lower charges than shareholding in mutual funds.