If you are someone who is used to procrastinating on making investments due to lack of money, then there are plenty of options right now.
Whether investing in the stock market or investments in debt category, it is possible even in small amounts. You may have heard about SIP of Rs 100. But if you want to invest in a lesser denomination and want to avoid the lock-in period, then ETFs can be a good option.
ETFs or Exchange Traded Funds work like mutual funds but are traded on the exchange of stock market. This means that these funds can be bought and sold from the exchange just like shares.
How do ETFs work?
ETFs are a way to invest in a lot of stocks at low cost. Apart from shares, you can also invest in other asset classes – like debt, commodity and gold – through ETFs. ETFs consider an index (index like SENSEX, NIFTY) as the base and invest in the shares included in it. You can buy and sell these funds in the same way as shares. These transactions can be done during the trading hours. The price of buying or selling them also varies during the intra- day business.
According to AMFI, investors have moved towards ETFs recently and it has seen a surge in the past 5 years. In February 2016, ETFs had an AUM of Rs 17,600 crore whereas in February 2021, this figure jumped to 2.87 lakh crore. ETFs are often more economical due to the lack of active management charges.
What is the difference between ETF and an index fund?
Index funds can be purchased on only one NAV a day. But ETFs can be bought or sold at different prices according to the fluctuations during the trading time of the stock market. However, to invest in an ETF, you will need a Demat account, just as it is required to invest in a stock. At the same time, you can invest in index funds directly through the fund house (AMC) website or any intermediary.
Is sectoral investment possible through ETFs?
In India, you can currently invest in debt, equity and gold through ETFs. Different ETFs exist for investing in different sectors in equity itself. There is an option to invest in ETFs ranging from IT, government banks, gilts, government securities to the newly emerging category ESG (Environment, Social, Governance). Before choosing the right ETF for you, it is important to understand that you want to invest on the basis of which sector or which index. Accordingly, you can choose the ETF.
If you want to start with an investment less than Rs 50, then you can look at the following: (3 pm – 31 March 2021)
|ETFs under Rs 50|
|LIC MF G-Sec Long Term ETF||21.46|
|Nippon India ETF Long Term Gilt||22|
|CPSE Exchange Traded Fund||22.76|
|Nippon India ETF PSU Bank BeES||23.69|
|Motilal Oswal Midcap 100 ETF||25.1|
|Nippon India ETF Nifty IT||25.35|
|UTI Bank Exchange Traded Fund||33.15|
|ICICI Prudential Nifty Next 50 ETF||34.89|
|BHARAT 22 ETF||36.05|
|Nippon India ETF Dividend Opportunities||37.35|
|Nippon India ETF Gold BeES||38.21|
|Axis Gold ETF Fund||38.36|
|UTI S&P BSE Sensex Next 50 ETF||39|
|HDFC Gold Exchange Traded Fund||39.55|
|ICICI Prudential Gold Exchange Traded Fund||39.5|
|UTI Gold Exchange Traded Fund||39.8|
|Motilal Oswal 5 Year G-Sec ETF||47.17|
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