ETF
Full form: Exchange Traded Fund
InvestmentsAn ETF is a mutual fund that trades on a stock exchange like a regular share. Tracks an index (Nifty 50 ETF, Gold ETF, Bharat Bond ETF) and can be bought/sold throughout the trading day at market prices, unlike regular mutual funds that transact only at end-of-day NAV.
In detail
ETF vs Index Mutual Fund:nETF: need demat account, trades on exchange, real-time pricing, usually lower TER (0.03-0.07% for top ETFs vs 0.1-0.2% for index funds)nIndex MF: no demat needed, transact at NAV, can set up SIP easily, no bid-ask spreadnnPopular Indian ETFs:nNifty 50 ETF: Nippon BeES (0.04%), SBI ETF (0.07%)nGold ETF: SBI Gold (0.50%)nBharat Bond ETF: AAA-rated PSU bonds, 3-11 year maturitiesnLiquid ETF: Nippon ETF Liquid BeES, daily dividend reinvestmentnnFor most retail SIP investors: index mutual fund is more practical. For lumpsum or short-term: ETF has lower costs.
Formula
Real-life example
Anand invests Rs 5L in Nifty 50 ETF (NIPPON BeES). TER 0.04%. At 5-year index return of 13%: net 12.96%. Same investment in an index mutual fund (TER 0.1%): 12.9%. ETF gives Rs 3,000 more on Rs 5L over 5 years -- marginal but adds up on large corpus.