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Calculated Shard: 191 (from laksa170)

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curl -X POST \
  'http://laksa191.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.bajajfinserv.in/investments/what-is-an-etf\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.bajajfinserv.in/investments/what-is-an-etf\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.bajajfinserv.in\/investments\/what-is-an-etf","crawl_time":1775421514,"first_indexed_time":1704839226,"http_code":200,"src_unparsed":"in,bajajfinserv!www,\/investments\/what-is-an-etf s443","src_root_hash":"1524140831662736991","history_drop_reason":null,"meta_title":"What is ETF - ETF Full Form and How ETFs Work","meta_descriptions":["An exchange-traded fund (ETF) is a type of investment company that allows investors to pool their money to buy stocks, bonds, or other assets. Read more."],"attrs_boilerpipe_text":"Home\nInvestments\nMutual Funds\nWhat is an ETF\n324\n3 mins\n13-January-2026\nETF's full form is an exchange-traded fund. It is a type of security that mirrors the performance of an index, commodity, bonds, or collection of assets, much like an index fund. In simple words, ETFs are funds that track various indexes, such as the CNX Nifty or the BSE Sensex, among others.\nIn recent years, India's financial markets have witnessed substantial growth and innovation, providing investors with an array of investment options. Among these, Exchange-Traded Funds (ETFs) have emerged as a popular and accessible mutual fund investment option, gaining significant traction among Indian investors.\nETFs have brought a new dimension to the Indian investment landscape, offering benefits that align well with the preferences and requirements of Indian investors. In this article, we will learn about the ETF meaning, how ETF work, and know about the different types of ETFs available. Also, we will check their advantages and associated risks and learn some key factors to consider before investing in ETFs. \nWhat Is an Exchange-Traded Fund (ETF)?\nAn Exchange-Traded Fund (ETF) is a marketable financial product traded on stock exchanges, much like individual stocks. The term ETF reflects its nature as an investment fund that holds a diverse portfolio of assets. Unlike a single stock representing one company, an ETF consists of a collection of securities. These may include stocks, bonds, commodities, or other instruments, providing investors with a convenient way to achieve diversification.\nETFs are designed to track the performance of specific indices, such as the CNX Nifty or the BSE Sensex, making them an efficient way for investors to gain exposure to broader market movements. One of the primary advantages of ETFs is their liquidity; investors can buy and sell shares throughout the trading day at market prices. Additionally, ETFs typically have lower expense ratios compared to \nmutual funds\n, making them an attractive option for cost-conscious investors. With their diverse range of offerings and easy accessibility, ETFs have become increasingly popular in recent years, appealing to both novice and seasoned investors seeking to diversify their portfolios.\nLet's explain the process of creating and redeeming ETF units using an example of a commodity, like gold:\nImagine there's an ETF that tracks the performance of gold prices. To make this ETF work, a special player called the \"authorized participant\" (AP) comes into the picture. APs are usually big financial institutions or market makers.\nHere's how it works:\nCreating ETF Units\n:\nWhen there is demand for more shares of the\ngold ETF\n, the AP steps in. They acquire the actual gold, just like physical gold bars or gold certificates, that will represent the value of t’e ETF's shares. They then deliver this gold to the ETF's manager\/ AMC, who takes care of the ETF's assets.\nIn return for delivering the gold, the ETF's manager\/\nAMC\ncreates new units of the ETF. These new units are then transferred to the AP. So, the AP now has units in the ETF that represent a portion of the total gold held by the ETF.\nRedeeming ETF Units:\nNow, let's say an investor wants to sell their units of the gold ETF. The AP buys those ETF units from the investor.\nWhen the investor sells their ETF units, the AP takes those units and redeems them back to the ETF's manager\/ AMC. In exchange, the ETF's manager gives the AP the corresponding amount of actual gold, just like the gold bars or certificates or cash that the ETF is holding.\nWhy invest in ETFs?\nInvesting in Exchange-Traded Funds (ETFs) offers numerous advantages, making them an attractive option for various investors. ETFs provide instant diversification by holding a basket of securities, reducing risk compared to investing in individual assets. They are cost-effective due to their low expense ratios and typically lower management fees. ETFs also offer flexibility, as they can be traded like stocks throughout market hours, providing liquidity and ease of access. Additionally, they cater to various investment goals, with options ranging from equity and bonds to sector-specific and international markets. Their transparency ensures that investors know the underlying holdings, enabling informed decisions.\nReason\nDescription\nDiversification\nETFs hold a mix of securities, spreading risk across different investments.\nCost-effective\nLow expense ratios and minimal management fees compared to mutual funds.\nLiquidity and flexibility\nTraded like stocks, ETFs allow buying and selling during market hours.\nVariety of options\nOffers access to equities, bonds, sectors, and international markets.\nTransparency\nHoldings are disclosed regularly for investor awareness.\nKeeping the ETF's Market Price in Line:\nThe process of creating and redeeming ETF units is essential for making sure the price of the ETF on the stock exchange stays very close to the actual value of the gold it holds. The Buy and Sell price of ETFs should lie in the close range of its real-time\nNAV\nfor maintaining product efficiency.\nIn summary, the creation and redemption mechanism with the help of authorized participants (APs) ensures that the price of the gold ETF on the stock exchange closely reflects the true value of the gold it holds. This way, investors can buy or sell shares of the gold ETF at a price that is fair and transparent, based on the actual value of the underlying commodity - gold.\nTypes of ETFs in India\nIndian investors can choose from a diverse range of ETFs to suit their investment objectives and risk appetites. Some of the common types of ETFs available in the Indian market include:\nIndex ETFs:\nThese ETFs aim to replicate the performance of a specific stock market index, such as the Nifty 50 or the Sensex. They provide investors with exposure to a broad market segment or a specific sector\/ Smart-Beta Strategy.\nGold\/ Silver ETFs:\nGold\/ Silver ETFs allow investors to invest in the price movements of gold\/ silver without physically owning the precious metal.\nSectoral ETFs:\nSector-specific ETFs enable investors to focus on particular industries or sectors, like banking, technology, or energy, etc.\nBond ETFs:\nBond ETFs invest in benchmark indices of fixed-income securities, including government bonds and corporate bonds, catering to investors seeking income and stability\nInternational ETFs:\nThese ETFs provide investors with exposure to international markets and assets via international Indices (viz. S&P 500, Nasdaq 100, etc) allowing them to diversify globally.\nSmart Beta ETFs:\nThese ETFs utilize alternative index construction methodologies, focusing on factors like low volatility, high dividend yield, quality, momentum, Alpha, etc rather than traditional market capitalization-based indices.\nCommodity ETFs:\nThese ETFs track the price movements of commodities like oil or precious metals.\nPassive ETFs:\nPassive ETFs aim to replicate the performance of a specific market index. In India, these funds commonly track indices such as the Nifty 50, Sensex, or sectoral indices. Since they simply mirror the index composition, passive ETFs generally have lower expense ratios and are widely used by investors seeking cost-efficient market exposure.\nActively Managed ETFs:\nUnlike passive ETFs, actively managed ETFs do not track a specific index. Instead, professional fund managers actively select and manage securities in the portfolio based on market opportunities and research. While these ETFs offer the potential to outperform benchmarks, they typically have higher management costs compared to passive ETFs.\nBitcoin \/ Crypto ETFs:\nSpot Bitcoin ETFs were approved by the U.S. Securities and Exchange Commission (SEC) in 2024, allowing investors in the U.S. to gain exposure to Bitcoin through traditional brokerage accounts. However, in India, cryptocurrency ETFs are not currently approved or listed on Indian exchanges, and investors cannot access such products through domestic ETF platforms.\nLeveraged ETFs:\nLeveraged ETFs aim to generate multiples of the returns of an underlying index, such as 2× or 3× the daily movement. These funds use derivatives and borrowed capital to amplify returns. However, leveraged ETFs are not widely available in the Indian ETF market, and Indian regulators generally take a cautious approach toward such high-risk products.\nAdvantages of ETFs for Indian Investors\nAffordability:\nETFs offer a cost-effective investment solution with relatively lower\nexpense ratios\n, making them an attractive choice for cost-conscious Indian investors.\nDiversification:\nETFs provide diversification by investing in a basket of securities, reducing exposure to individual stock risks.\nLiquidity:\nBeing listed on stock exchanges, ETFs offer intraday liquidity, allowing investors to buy or sell units at prevailing market prices throughout the trading day.\nTaxation:\nTaxation for ETFs depend on the underlying stock. Index and sectoral ETFs are regarded as equity-oriented ETFs when it comes to tax. As a result, \nshort-term capital gains\non ETF units retained for less than a year are taxed at a rate of 15%. Long-term capital gains on units maintained for over a year are levied at a rate of 10%, without the benefit of indexation. Long-term capital gains up to Rs. 1 lakh are exempt from tax.\nGold ETFs and international ETFs are treated as non-equity funds for taxation purposes. if ETF units are held for less than 36 months, any short-term gains are taxed according to the relevant income tax bracket. \nLong-term capital gains\nfrom units held longer than a year are subject to a 20% tax, considering the indexation benefit.\nA note to be included wherever tax rates are mentioned. The note to state that the tax rates mentioned above are excluding surcharge if any and cess.\nTransparency:\nETFs regularly disclose their portfolios, NAVs enabling investors to make informed decisions about their investments.\nExchange-Traded Funds (ETFs): Understanding Risks\nExchange-Traded Funds (ETFs), like any other investment assets, come with \ninherent risks\nthat investors need to be aware of before making investment decisions. Understanding these risks is essential to manage investments prudently and align them with individual financial goals and risk tolerance.\nLet's delve into some of the key risks associated with ETF investments in the Indian context:\nMarket Risk:\nETFs are subject to\nmarket risk\n, which refers to the potential losses stemming from overall market movements. If the market experiences a downturn, the value of the underlying assets in the ETF's portfolio can decrease, leading to a decline in the ETF's net asset value (\nNAV\n) and market price.\nTracking Error:\nWhile ETFs aim to replicate the performance of a specific index or asset, there might be a slight disparity between the ETF's returns and the index it tracks. This difference is known as tracking error and can be influenced by factors such as transaction costs, management fees, and imperfect replication of the index.\nLiquidity Risk:\nAlthough ETFs are traded on stock exchanges, the\nliquidity\nof certain ETFs may vary. In times of market stress or if the underlying assets are illiquid, it may become challenging to buy or sell ETF units at the desired price, potentially resulting in higher bid-ask spreads.\nConcentration Risk:\nSome ETFs are concentrated in specific sectors, industries, or\nasset classes\n. If the particular sector or industry faces challenges or a significant event affects the asset class, the ETF's performance could be adversely impacted.\nCurrency Risk:\nFor ETFs with international exposure, fluctuations in currency exchange rates can affect the returns for Indian investors. Currency risk arises when the investment is denominated in foreign currency, and changes in exchange rates can either enhance or erode investment gains.\nCounterparty Risk:\nSome ETFs use financial derivatives or engage in securities lending to enhance returns. This introduces counterparty risk, which is the risk that the entity on the other side of the transaction might default or fail to fulfil its obligations.\nInherent Risk of Underlying Assets:\nETFs invest in a diversified basket of assets, but the risk associated with the underlying assets remains. For instance, equity ETFs may be exposed to risks associated with the individual stocks in the portfolio, while bond ETFs may face interest rate risk and\ncredit risk\n.\nRegulatory and Taxation Risks:\nChanges in government regulations or tax laws can impact the returns and taxation of ETF investments, potentially affecting the attractiveness of certain ETFs.\n \nPros and Cons of ETFs \nPros\nDiversified market exposure:\nETFs allow investors to gain exposure to multiple companies across sectors through indices such as Nifty 50, Sensex, or sectoral indices.\nLower costs:\nMost ETFs in India have relatively low expense ratios compared to actively managed mutual funds. Brokerage charges are also generally minimal.\nDiversification benefits:\nBy tracking a basket of securities, ETFs help reduce the risk associated with investing in a single stock.\nTargeted investment options:\nInvestors can choose ETFs focused on specific sectors, themes, commodities like gold, or broader market indices.\nCons\nHigher costs for active ETFs:\nActively managed ETFs may have higher expense ratios compared to passive index-tracking ETFs.\nLimited diversification in sector ETFs:\nETFs focused on a single sector or theme may increase concentration risk.\nLiquidity concerns:\nSome ETFs listed on Indian exchanges may have lower trading volumes, which can affect ease of buying or selling units at desired prices.\nHow is an ETF different from an index fund?\nAn ETF (exchange-traded fund) differs from an index fund primarily in trading mechanisms and pricing. ETFs trade on stock exchanges like individual stocks, allowing for intraday buying and selling at fluctuating market prices. In contrast, index funds are bought and sold at the end of the trading day at the net asset value (NAV). Additionally, ETFs often have lower expense ratios and can be more tax-efficient due to their unique structure, whereas index funds may have minimum investment requirements. Both aim to replicate the performance of a specific index, but their trading flexibility and cost structures vary significantly.\nHow do ETFs and mutual funds compare?\nETFs and mutual funds are both investment vehicles offering diversification, but they differ in structure, trading, and costs. ETFs trade on stock exchanges like individual stocks, allowing investors to buy and sell throughout market hours. In contrast, mutual funds are bought or redeemed at the day's Net Asset Value (NAV). ETFs typically have lower expense ratios due to their passive management approach, while mutual funds may have higher costs from active management. ETFs are more tax-efficient, as their structure minimises capital gains distributions. Mutual funds often require a minimum investment, but ETFs can be purchased in single units. While ETFs offer real-time pricing, mutual funds provide convenience through \nsystematic investment plans\n(SIPs). Choosing between the two depends on an investor’s preferences for trading flexibility, cost structure, and investment strategy, with ETFs suiting short-term or cost-conscious investors and mutual funds appealing to those seeking long-term active management.\nDo ETFs provide diversity?\nYes, ETFs provide diversity by offering exposure to a wide range of assets within a single investment. Each ETF typically holds a basket of securities, which may include stocks, bonds, commodities, or real estate, reflecting various sectors or market indices. This diversification reduces individual\ninvestment risk\n, as poor performance in one security can be balanced by gains in others. Additionally, investors can access niche markets or specific themes through targeted ETFs, enhancing their portfolio's breadth. Overall, ETFs serve as an effective tool for investors seeking to achieve a diversified investment strategy while maintaining liquidity and flexibility.\nHow much do ETFs cost?\nETFs are generally considered a cost-efficient investment option. The primary cost involved is the expense ratio, which covers fund management, administration, and operational expenses. For most equity ETFs, this expense ratio is relatively low compared to other investment products. In addition to this, investors may incur brokerage charges when buying or selling ETF units on the stock exchange. Some platforms may also apply small transaction or demat-related charges. Since ETFs are passively managed in most cases, their overall costs tend to remain lower, helping investors retain a larger share of their returns over the long term.\nETF creation and redemption\nETF creation and redemption is a process handled by authorised participants, usually large institutional investors. When demand for an ETF increases, authorised participants create new ETF units by delivering a basket of underlying securities to the fund house. In return, they receive ETF units, which are then sold on the stock exchange. Conversely, when supply exceeds demand, ETF units are redeemed by returning them to the fund house in exchange for the underlying securities. This mechanism helps keep the ETF’s market price close to its net asset value and ensures liquidity in the market.\nHow to find the right ETFs for your portfolio\nChoosing the right ETFs starts with understanding your investment goals, time horizon, and risk tolerance. Investors should first identify whether they want exposure to equities, debt, commodities, or international markets. Evaluating the ETF’s underlying index is equally important, as it determines performance and risk characteristics. Expense ratios should be compared, as lower costs can improve long-term returns. Liquidity is another key factor, so checking average trading volumes and bid-ask spreads is useful. Investors should also review the fund size and tracking error to assess efficiency. Aligning ETF selection with overall asset allocation helps create a balanced and goal-oriented portfolio.\nETFs vs mutual funds vs stocks\nWhen compared with other investment options, exchange-traded funds offer several distinct advantages. Lower costs, broad diversification, and flexibility are some of the reasons ETFs are widely preferred. Below is a comparison highlighting key differences between ETFs, mutual funds, and individual stocks.\nAspect\nExchange-traded funds (ETFs)\nMutual funds\nIndividual stocks\nFees\nAverage equity ETF expense ratio is around 0.15%\nAverage equity mutual fund expense ratio is about 0.42%, along with possible additional charges\nBrokerage or commission fees, often zero but may go up to $5\nHow to buy\nBought and sold during regular and extended market hours\nTransactions are processed after market close at the day’s NAV\nBought and sold during regular and extended market hours\nFactors to Consider Before Investing in ETFs\nInvestment Objective: Determine your investment goals, whether it's capital appreciation, income generation, or diversification. Choose an ETF that aligns with your objectives.\nAsset Class and Sector: ETFs cover various asset classes and sectors. Assess your\nrisk tolerance\nand preference for sectors like technology, healthcare, or commodities before investing.\nExpense Ratio: Evaluate the ETF's expense ratio, as lower fees can impact your overall returns. Look for cost-efficient options without compromising quality.\nLiquidity: Ensure the ETF has sufficient trading volume and liquidity to buy and sell shares without significant price fluctuations.\nHistorical Performance: Examine the ETF's historical performance and its ability to track its underlying index accurately. Past performance isn't indicative of future results, but it provides insights into the ETF's tracking ability.\nKey takeaways\nTrading mechanisms\n: ETFs differ from index funds in their trading structure; ETFs trade on stock exchanges like individual stocks, allowing intraday transactions at fluctuating prices, while index funds are traded at the end of the day at their net asset value (NAV).\nDiversity in investment\n: ETFs offer significant diversity by holding a collection of various securities, such as stocks, bonds, or commodities, which helps to mitigate individual investment risk and provides broader market exposure.\nCost efficiency\n: Generally, ETFs have lower expense ratios compared to index funds, making them a cost-effective option for investors seeking diversification and flexibility in their portfolios.\nConclusion\nWhile ETFs offer several advantages, it is crucial to recognize and manage the inherent risks associated with these investment vehicles. By adopting a well-informed and balanced approach, investors can leverage the\nbenefits of ETFs\nwhile navigating potential risks effectively. Consulting with a financial advisor and conducting thorough due diligence are essential steps to make informed investment decisions and align ETF investments with individual financial goals and risk tolerance.\nDiscover a wide selection of ETFs with comprehensive analysis for informed investing on the Bajaj Finserv platform.\nETFs provide diversification by investing in various stocks or bonds, effectively reducing overall portfolio risk. Moreover, they are easily accessible, allowing you to buy and sell throughout the trading day. Start your ETF investment journey with us today!\nEssential tools for mutual fund investors\n \nMutual Fund Calculator\nLumpsum Calculator\nStep Up SIP Calculator\nSystematic Investment Plan Calculator\nSBI SIP Calculator\nHDFC SIP Calculator\nAxis Bank SIP Calculator\nICICI SIP Calculator\nNippon India SIP Calculator\nABSL SIP Calculator\nGroww SIP Calculator\nLIC SIP Calculator\nFrequently Asked Questions\nExchange-Traded Funds (ETFs) are like baskets of assets, such as stocks, bonds, or commodities, that are traded on stock exchanges, providing investors with diversified exposure to these assets.\nThe \"best\" ETF depends on your investment goals. Choose based on your objectives and risk tolerance.\nYes, you can sell ETF shares anytime during market hours when the stock exchange is open. ETFs offer intraday liquidity, so you can trade them throughout the trading session.\nAn ETF, or exchange-traded fund, is marketable security. It is an investment that trades like a stock but represents a collection of assets, such as stocks, bonds, or commodities. The primary goal of an ETF is to match the performance of a specific index, like CNX Nifty or BSE Sensex. When you buy an ETF, you are investing in a portfolio that reflects the performance of that index.\nETFs can be a safe investment option if used wisely. They provide the benefits of diversification and flexibility. Indexed ETFs, which follow indexes like the S&P 500, are usually considered safe as they grow in value over time. On the other hand, leveraged ETFs aim to increase returns but come with higher risk due to their increased volatility.\nShow More\nShow Less\nTrusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.\nYou can use the Bajaj Finserv App to:\nApply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.\nInvest in fixed deposits and mutual funds on the app.\nChoose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.\nPay and manage your bills and recharges using the BBPS platform. 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The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. \nThis information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.\nDisclaimer:\nBajaj Finance Limited (\"BFL\") is registered with the Association of Mutual Funds in India (\"AMFI\") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319\nBFL does NOT:\n(i) provide investment advisory services in any manner or form:\n(ii) carry customized\/personalized suitability assessment:\n(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.\nIn addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. 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[Investments](https:\/\/www.bajajfinserv.in\/investments \"Investments\")\n3. [Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/mutual-funds \"Mutual Funds\")\n4. What is an ETF\n\n# What is ETF\nAn exchange-traded fund (ETF) is a collection of investments that allows investors to pool money to buy stocks, bonds, or other assets. ETFs are traded like shares on stock exchanges and are made up of a collection of assets, such as shares, bonds, or commodities. ETFs are registered with the SEC and can be traded on a national securities exchange throughout the day.\n\n[INVEST NOW](https:\/\/www.bajajfinserv.in\/mutual-funds\/login?sourcing_channel=BFL&utm_source=MF&utm_medium=ADP&utm_campaign=income-tax-slabs#adp \"INVEST NOW\")\n\nWhat Is ETF and how does it work\n\n[INVEST NOW](https:\/\/www.bajajfinserv.in\/mutual-funds\/login?sourcing_channel=BFL&utm_source=MF&utm_medium=ADP&utm_campaign=income-tax-slabs#adp \"INVEST NOW\")\n\n324 3 mins\n\n13-January-2026\n\nETF's full form is an exchange-traded fund. It is a type of security that mirrors the performance of an index, commodity, bonds, or collection of assets, much like an index fund. In simple words, ETFs are funds that track various indexes, such as the CNX Nifty or the BSE Sensex, among others.\n\nIn recent years, India's financial markets have witnessed substantial growth and innovation, providing investors with an array of investment options. Among these, Exchange-Traded Funds (ETFs) have emerged as a popular and accessible mutual fund investment option, gaining significant traction among Indian investors.\n\nETFs have brought a new dimension to the Indian investment landscape, offering benefits that align well with the preferences and requirements of Indian investors. In this article, we will learn about the ETF meaning, how ETF work, and know about the different types of ETFs available. Also, we will check their advantages and associated risks and learn some key factors to consider before investing in ETFs.\n\n## **What Is an Exchange-Traded Fund (ETF)?**\nAn Exchange-Traded Fund (ETF) is a marketable financial product traded on stock exchanges, much like individual stocks. The term ETF reflects its nature as an investment fund that holds a diverse portfolio of assets. Unlike a single stock representing one company, an ETF consists of a collection of securities. These may include stocks, bonds, commodities, or other instruments, providing investors with a convenient way to achieve diversification.\n\nETFs are designed to track the performance of specific indices, such as the CNX Nifty or the BSE Sensex, making them an efficient way for investors to gain exposure to broader market movements. One of the primary advantages of ETFs is their liquidity; investors can buy and sell shares throughout the trading day at market prices. Additionally, ETFs typically have lower expense ratios compared to [mutual funds](https:\/\/www.bajajfinserv.in\/investments\/mutual-funds), making them an attractive option for cost-conscious investors. With their diverse range of offerings and easy accessibility, ETFs have become increasingly popular in recent years, appealing to both novice and seasoned investors seeking to diversify their portfolios.\n\n## **How ETFs Work?**\nLet's explain the process of creating and redeeming ETF units using an example of a commodity, like gold:\n\nImagine there's an ETF that tracks the performance of gold prices. To make this ETF work, a special player called the \"authorized participant\" (AP) comes into the picture. APs are usually big financial institutions or market makers.\n\n## Here's how it works:\n1. **Creating ETF Units**:  \n   When there is demand for more shares of the [gold ETF](https:\/\/www.bajajfinserv.in\/investments\/gold-etf), the AP steps in. They acquire the actual gold, just like physical gold bars or gold certificates, that will represent the value of t’e ETF's shares. They then deliver this gold to the ETF's manager\/ AMC, who takes care of the ETF's assets.  \n   In return for delivering the gold, the ETF's manager\/ [AMC](https:\/\/www.bajajfinserv.in\/investments\/unravelling-the-role-of-asset-management-companies) creates new units of the ETF. These new units are then transferred to the AP. So, the AP now has units in the ETF that represent a portion of the total gold held by the ETF.\n2. **Redeeming ETF Units:**  \n   Now, let's say an investor wants to sell their units of the gold ETF. The AP buys those ETF units from the investor.  \n   When the investor sells their ETF units, the AP takes those units and redeems them back to the ETF's manager\/ AMC. In exchange, the ETF's manager gives the AP the corresponding amount of actual gold, just like the gold bars or certificates or cash that the ETF is holding.\n## Why invest in ETFs?\nInvesting in Exchange-Traded Funds (ETFs) offers numerous advantages, making them an attractive option for various investors. ETFs provide instant diversification by holding a basket of securities, reducing risk compared to investing in individual assets. They are cost-effective due to their low expense ratios and typically lower management fees. ETFs also offer flexibility, as they can be traded like stocks throughout market hours, providing liquidity and ease of access. Additionally, they cater to various investment goals, with options ranging from equity and bonds to sector-specific and international markets. Their transparency ensures that investors know the underlying holdings, enabling informed decisions.\n\n|   |   |\n|---|---|\n| **Reason** | **Description** |\n| Diversification | ETFs hold a mix of securities, spreading risk across different investments. |\n| Cost-effective | Low expense ratios and minimal management fees compared to mutual funds. |\n| Liquidity and flexibility | Traded like stocks, ETFs allow buying and selling during market hours. |\n| Variety of options | Offers access to equities, bonds, sectors, and international markets. |\n| Transparency | Holdings are disclosed regularly for investor awareness. |\n## Keeping the ETF's Market Price in Line:\nThe process of creating and redeeming ETF units is essential for making sure the price of the ETF on the stock exchange stays very close to the actual value of the gold it holds. The Buy and Sell price of ETFs should lie in the close range of its real-time [NAV](https:\/\/www.bajajfinserv.in\/investments\/nav-explained) for maintaining product efficiency.\n\nIn summary, the creation and redemption mechanism with the help of authorized participants (APs) ensures that the price of the gold ETF on the stock exchange closely reflects the true value of the gold it holds. This way, investors can buy or sell shares of the gold ETF at a price that is fair and transparent, based on the actual value of the underlying commodity - gold.\n\n##\n## **Types of ETFs in India**\nIndian investors can choose from a diverse range of ETFs to suit their investment objectives and risk appetites. Some of the common types of ETFs available in the Indian market include:\n\n1. **Index ETFs:** These ETFs aim to replicate the performance of a specific stock market index, such as the Nifty 50 or the Sensex. They provide investors with exposure to a broad market segment or a specific sector\/ Smart-Beta Strategy.\n2. **Gold\/ Silver ETFs:** Gold\/ Silver ETFs allow investors to invest in the price movements of gold\/ silver without physically owning the precious metal.\n3. **Sectoral ETFs:** Sector-specific ETFs enable investors to focus on particular industries or sectors, like banking, technology, or energy, etc.\n4. **Bond ETFs:** Bond ETFs invest in benchmark indices of fixed-income securities, including government bonds and corporate bonds, catering to investors seeking income and stability\n5. **International ETFs:** These ETFs provide investors with exposure to international markets and assets via international Indices (viz. S\\&P 500, Nasdaq 100, etc) allowing them to diversify globally.\n6. **Smart Beta ETFs:** These ETFs utilize alternative index construction methodologies, focusing on factors like low volatility, high dividend yield, quality, momentum, Alpha, etc rather than traditional market capitalization-based indices.\n7. **Commodity ETFs:** These ETFs track the price movements of commodities like oil or precious metals.\n8. **Passive ETFs:** Passive ETFs aim to replicate the performance of a specific market index. In India, these funds commonly track indices such as the Nifty 50, Sensex, or sectoral indices. Since they simply mirror the index composition, passive ETFs generally have lower expense ratios and are widely used by investors seeking cost-efficient market exposure.\n9. **Actively Managed ETFs:** Unlike passive ETFs, actively managed ETFs do not track a specific index. Instead, professional fund managers actively select and manage securities in the portfolio based on market opportunities and research. While these ETFs offer the potential to outperform benchmarks, they typically have higher management costs compared to passive ETFs.\n10. **Bitcoin \/ Crypto ETFs:** Spot Bitcoin ETFs were approved by the U.S. Securities and Exchange Commission (SEC) in 2024, allowing investors in the U.S. to gain exposure to Bitcoin through traditional brokerage accounts. However, in India, cryptocurrency ETFs are not currently approved or listed on Indian exchanges, and investors cannot access such products through domestic ETF platforms.\n11. **Leveraged ETFs:** Leveraged ETFs aim to generate multiples of the returns of an underlying index, such as 2× or 3× the daily movement. These funds use derivatives and borrowed capital to amplify returns. However, leveraged ETFs are not widely available in the Indian ETF market, and Indian regulators generally take a cautious approach toward such high-risk products.\n##\n## **Advantages of ETFs for Indian Investors**\n1. **Affordability:** ETFs offer a cost-effective investment solution with relatively lower [expense ratios](https:\/\/www.bajajfinserv.in\/investments\/what-is-expense-ratio), making them an attractive choice for cost-conscious Indian investors.\n2. **Diversification:** ETFs provide diversification by investing in a basket of securities, reducing exposure to individual stock risks.\n3. **Liquidity:** Being listed on stock exchanges, ETFs offer intraday liquidity, allowing investors to buy or sell units at prevailing market prices throughout the trading day.\n4. **Taxation:** Taxation for ETFs depend on the underlying stock. Index and sectoral ETFs are regarded as equity-oriented ETFs when it comes to tax. As a result, [short-term capital gains](https:\/\/www.bajajfinserv.in\/investments\/understanding-short-term-capital-gains-tax) on ETF units retained for less than a year are taxed at a rate of 15%. Long-term capital gains on units maintained for over a year are levied at a rate of 10%, without the benefit of indexation. Long-term capital gains up to Rs. 1 lakh are exempt from tax.  \n   Gold ETFs and international ETFs are treated as non-equity funds for taxation purposes. if ETF units are held for less than 36 months, any short-term gains are taxed according to the relevant income tax bracket. [Long-term capital gains](https:\/\/www.bajajfinserv.in\/investments\/understanding-long-term-capital-gains-tax) from units held longer than a year are subject to a 20% tax, considering the indexation benefit.  \n   A note to be included wherever tax rates are mentioned. The note to state that the tax rates mentioned above are excluding surcharge if any and cess.\n5. **Transparency:** ETFs regularly disclose their portfolios, NAVs enabling investors to make informed decisions about their investments.\n## **Exchange-Traded Funds (ETFs): Understanding Risks**\nExchange-Traded Funds (ETFs), like any other investment assets, come with [inherent risks](https:\/\/www.bajajfinserv.in\/investments\/what-is-inherent-risk) that investors need to be aware of before making investment decisions. Understanding these risks is essential to manage investments prudently and align them with individual financial goals and risk tolerance.\n\nLet's delve into some of the key risks associated with ETF investments in the Indian context:\n\n1. **Market Risk:** ETFs are subject to [market risk](https:\/\/www.bajajfinserv.in\/investments\/what-is-market-risk), which refers to the potential losses stemming from overall market movements. If the market experiences a downturn, the value of the underlying assets in the ETF's portfolio can decrease, leading to a decline in the ETF's net asset value ([NAV](https:\/\/www.bajajfinserv.in\/investments\/nav-explained)) and market price.\n2. **Tracking Error:** While ETFs aim to replicate the performance of a specific index or asset, there might be a slight disparity between the ETF's returns and the index it tracks. This difference is known as tracking error and can be influenced by factors such as transaction costs, management fees, and imperfect replication of the index.\n3. **Liquidity Risk:** Although ETFs are traded on stock exchanges, the [liquidity](https:\/\/www.bajajfinserv.in\/investments\/liquidity-risk) of certain ETFs may vary. In times of market stress or if the underlying assets are illiquid, it may become challenging to buy or sell ETF units at the desired price, potentially resulting in higher bid-ask spreads.\n4. **Concentration Risk:** Some ETFs are concentrated in specific sectors, industries, or [asset classes](https:\/\/www.bajajfinserv.in\/investments\/understanding-mutual-fund-asset-classes). If the particular sector or industry faces challenges or a significant event affects the asset class, the ETF's performance could be adversely impacted.\n5. **Currency Risk:** For ETFs with international exposure, fluctuations in currency exchange rates can affect the returns for Indian investors. Currency risk arises when the investment is denominated in foreign currency, and changes in exchange rates can either enhance or erode investment gains.\n6. **Counterparty Risk:** Some ETFs use financial derivatives or engage in securities lending to enhance returns. This introduces counterparty risk, which is the risk that the entity on the other side of the transaction might default or fail to fulfil its obligations.\n7. **Inherent Risk of Underlying Assets:** ETFs invest in a diversified basket of assets, but the risk associated with the underlying assets remains. For instance, equity ETFs may be exposed to risks associated with the individual stocks in the portfolio, while bond ETFs may face interest rate risk and [credit risk](https:\/\/www.bajajfinserv.in\/investments\/credit-risk).\n8. **Regulatory and Taxation Risks:** Changes in government regulations or tax laws can impact the returns and taxation of ETF investments, potentially affecting the attractiveness of certain ETFs.\n## Pros and Cons of ETFs\n**Pros**\n\n- **Diversified market exposure:** ETFs allow investors to gain exposure to multiple companies across sectors through indices such as Nifty 50, Sensex, or sectoral indices.\n- **Lower costs:** Most ETFs in India have relatively low expense ratios compared to actively managed mutual funds. Brokerage charges are also generally minimal.\n- **Diversification benefits:** By tracking a basket of securities, ETFs help reduce the risk associated with investing in a single stock.\n- **Targeted investment options:** Investors can choose ETFs focused on specific sectors, themes, commodities like gold, or broader market indices.\n\n**Cons**\n\n- **Higher costs for active ETFs:** Actively managed ETFs may have higher expense ratios compared to passive index-tracking ETFs.\n- **Limited diversification in sector ETFs:** ETFs focused on a single sector or theme may increase concentration risk.\n- **Liquidity concerns:** Some ETFs listed on Indian exchanges may have lower trading volumes, which can affect ease of buying or selling units at desired prices.\n##\n## **How is an ETF different from an index fund?**\nAn ETF (exchange-traded fund) differs from an index fund primarily in trading mechanisms and pricing. ETFs trade on stock exchanges like individual stocks, allowing for intraday buying and selling at fluctuating market prices. In contrast, index funds are bought and sold at the end of the trading day at the net asset value (NAV). Additionally, ETFs often have lower expense ratios and can be more tax-efficient due to their unique structure, whereas index funds may have minimum investment requirements. Both aim to replicate the performance of a specific index, but their trading flexibility and cost structures vary significantly.\n\n## How do ETFs and mutual funds compare?\nETFs and mutual funds are both investment vehicles offering diversification, but they differ in structure, trading, and costs. ETFs trade on stock exchanges like individual stocks, allowing investors to buy and sell throughout market hours. In contrast, mutual funds are bought or redeemed at the day's Net Asset Value (NAV). ETFs typically have lower expense ratios due to their passive management approach, while mutual funds may have higher costs from active management. ETFs are more tax-efficient, as their structure minimises capital gains distributions. Mutual funds often require a minimum investment, but ETFs can be purchased in single units. While ETFs offer real-time pricing, mutual funds provide convenience through [systematic investment plans](https:\/\/www.bajajfinserv.in\/investments\/what-is-sip) (SIPs). Choosing between the two depends on an investor’s preferences for trading flexibility, cost structure, and investment strategy, with ETFs suiting short-term or cost-conscious investors and mutual funds appealing to those seeking long-term active management.\n\n## **Do ETFs provide diversity?**\nYes, ETFs provide diversity by offering exposure to a wide range of assets within a single investment. Each ETF typically holds a basket of securities, which may include stocks, bonds, commodities, or real estate, reflecting various sectors or market indices. This diversification reduces individual [investment risk](https:\/\/www.bajajfinserv.in\/investments\/investment-risk), as poor performance in one security can be balanced by gains in others. Additionally, investors can access niche markets or specific themes through targeted ETFs, enhancing their portfolio's breadth. Overall, ETFs serve as an effective tool for investors seeking to achieve a diversified investment strategy while maintaining liquidity and flexibility.\n\n## **How much do ETFs cost?**\nETFs are generally considered a cost-efficient investment option. The primary cost involved is the expense ratio, which covers fund management, administration, and operational expenses. For most equity ETFs, this expense ratio is relatively low compared to other investment products. In addition to this, investors may incur brokerage charges when buying or selling ETF units on the stock exchange. Some platforms may also apply small transaction or demat-related charges. Since ETFs are passively managed in most cases, their overall costs tend to remain lower, helping investors retain a larger share of their returns over the long term.\n\n## **ETF creation and redemption**\nETF creation and redemption is a process handled by authorised participants, usually large institutional investors. When demand for an ETF increases, authorised participants create new ETF units by delivering a basket of underlying securities to the fund house. In return, they receive ETF units, which are then sold on the stock exchange. Conversely, when supply exceeds demand, ETF units are redeemed by returning them to the fund house in exchange for the underlying securities. This mechanism helps keep the ETF’s market price close to its net asset value and ensures liquidity in the market.\n\n## **How to find the right ETFs for your portfolio**\nChoosing the right ETFs starts with understanding your investment goals, time horizon, and risk tolerance. Investors should first identify whether they want exposure to equities, debt, commodities, or international markets. Evaluating the ETF’s underlying index is equally important, as it determines performance and risk characteristics. Expense ratios should be compared, as lower costs can improve long-term returns. Liquidity is another key factor, so checking average trading volumes and bid-ask spreads is useful. Investors should also review the fund size and tracking error to assess efficiency. Aligning ETF selection with overall asset allocation helps create a balanced and goal-oriented portfolio.\n\n## **ETFs vs mutual funds vs stocks**\nWhen compared with other investment options, exchange-traded funds offer several distinct advantages. Lower costs, broad diversification, and flexibility are some of the reasons ETFs are widely preferred. Below is a comparison highlighting key differences between ETFs, mutual funds, and individual stocks.\n\n|   |   |   |   |\n|---|---|---|---|\n| **Aspect** | **Exchange-traded funds (ETFs)** | **Mutual funds** | **Individual stocks** |\n| Fees | Average equity ETF expense ratio is around 0.15% | Average equity mutual fund expense ratio is about 0.42%, along with possible additional charges | Brokerage or commission fees, often zero but may go up to \\$5 |\n| How to buy | Bought and sold during regular and extended market hours | Transactions are processed after market close at the day’s NAV | Bought and sold during regular and extended market hours |\n## **Factors to Consider Before Investing in ETFs**\n1. Investment Objective: Determine your investment goals, whether it's capital appreciation, income generation, or diversification. Choose an ETF that aligns with your objectives.\n2. Asset Class and Sector: ETFs cover various asset classes and sectors. Assess your [risk tolerance](https:\/\/www.bajajfinserv.in\/investments\/what-is-risk-tolerance) and preference for sectors like technology, healthcare, or commodities before investing.\n3. Expense Ratio: Evaluate the ETF's expense ratio, as lower fees can impact your overall returns. Look for cost-efficient options without compromising quality.\n4. Liquidity: Ensure the ETF has sufficient trading volume and liquidity to buy and sell shares without significant price fluctuations.\n5. Historical Performance: Examine the ETF's historical performance and its ability to track its underlying index accurately. Past performance isn't indicative of future results, but it provides insights into the ETF's tracking ability.\n## **Key takeaways**\n- **Trading mechanisms**: ETFs differ from index funds in their trading structure; ETFs trade on stock exchanges like individual stocks, allowing intraday transactions at fluctuating prices, while index funds are traded at the end of the day at their net asset value (NAV).\n- **Diversity in investment**: ETFs offer significant diversity by holding a collection of various securities, such as stocks, bonds, or commodities, which helps to mitigate individual investment risk and provides broader market exposure.\n- **Cost efficiency**: Generally, ETFs have lower expense ratios compared to index funds, making them a cost-effective option for investors seeking diversification and flexibility in their portfolios.\n## **Conclusion**\nWhile ETFs offer several advantages, it is crucial to recognize and manage the inherent risks associated with these investment vehicles. By adopting a well-informed and balanced approach, investors can leverage the [benefits of ETFs](https:\/\/www.bajajfinserv.in\/investments\/advantages-of-etfs) while navigating potential risks effectively. Consulting with a financial advisor and conducting thorough due diligence are essential steps to make informed investment decisions and align ETF investments with individual financial goals and risk tolerance.\n\nDiscover a wide selection of ETFs with comprehensive analysis for informed investing on the Bajaj Finserv platform.\n\nETFs provide diversification by investing in various stocks or bonds, effectively reducing overall portfolio risk. Moreover, they are easily accessible, allowing you to buy and sell throughout the trading day. Start your ETF investment journey with us today\\!\n\n## Essential tools for mutual fund investors\n|   |   |   |   |\n|---|---|---|---|\n| [Mutual Fund Calculator](https:\/\/www.bajajfinserv.in\/investments\/mutual-fund-calculator) | [Lumpsum Calculator](https:\/\/www.bajajfinserv.in\/investments\/lumpsum-calculator) | [Step Up SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/step-up-sip-calculator) | [Systematic Investment Plan Calculator](https:\/\/www.bajajfinserv.in\/investments\/sip-calculator) |\n| [SBI SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/sbi-sip-calculator) | [HDFC SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/hdfc-sip-calculator) | [Axis Bank SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/axis-bank-sip-calculator) | [ICICI SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/icici-sip-calculator) |\n| [Nippon India SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/nippon-india-sip-calculator) | [ABSL SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/aditya-birla-sun-life-sip-calculator) | [Groww SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/groww-sip-calculator) | [LIC SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/lic-sip-calculator) |\n\n## Frequently Asked Questions\nWhat are ETFs in simple words?\n\nExchange-Traded Funds (ETFs) are like baskets of assets, such as stocks, bonds, or commodities, that are traded on stock exchanges, providing investors with diversified exposure to these assets.\n\nWhat is the best ETF in India?\n\nThe \"best\" ETF depends on your investment goals. Choose based on your objectives and risk tolerance.\n\nCan I sell ETF anytime?\n\nYes, you can sell ETF shares anytime during market hours when the stock exchange is open. ETFs offer intraday liquidity, so you can trade them throughout the trading session.\n\nWhat is ETF’s full form?\n\nAn ETF, or exchange-traded fund, is marketable security. It is an investment that trades like a stock but represents a collection of assets, such as stocks, bonds, or commodities. The primary goal of an ETF is to match the performance of a specific index, like CNX Nifty or BSE Sensex. When you buy an ETF, you are investing in a portfolio that reflects the performance of that index.\n\nIs ETF safe to invest in?\n\nETFs can be a safe investment option if used wisely. They provide the benefits of diversification and flexibility. Indexed ETFs, which follow indexes like the S\\&P 500, are usually considered safe as they grow in value over time. On the other hand, leveraged ETFs aim to increase returns but come with higher risk due to their increased volatility.\n\nWhich is better, LIC or ETF?\n\nLICs (Listed Investment Companies) generally have higher fees than ETFs because they are actively managed and have a closed-end structure. Despite leading to higher fees, this active management offers several advantages, such as expert stock selection and strategic adjustments. Additionally, LICs provide benefits like purchase discounts. ETFs, on the other hand, are usually passively managed and open-ended. They carry comparatively lower fees and focus more on replicating an index.\n\nWhich is the 1st ETF in India?\n\nNifty Bees is India's first exchange-traded fund (ETF). It was launched by Benchmark Asset Management in December 2001. This ETF tracks the Nifty 50 Index and aims to replicate the performance of the top 50 companies listed on the National Stock Exchange (NSE) of India.\n\nHow is ETF calculated?\n\nAn ETF's daily Net Asset Value (NAV) is calculated by taking the most recent closing prices of all its holdings on a weighted basis. Then, any cash the ETF holds is added to these closing prices. From this total, any liabilities on the ETF's balance sheet are subtracted. The resulting amount is then divided by the total number of ETF shares outstanding. This gives the NAV per share, which shows the value of one share of the ETF.\n\nHow to purchase ETF?\n\nTo buy an ETF, start by setting up a brokerage account. Once your account is ready, use its screening tools to research and compare different ETFs. Find the ones that fit your investment goals. After selecting the ETFs you want to invest in, place a “trade order” through your brokerage account. Specify the number of shares you wish to purchase, and your brokerage will execute the order on your behalf.\n\nWhat are the disadvantages of ETFs?\n\nETFs come with fees that reduce your returns. Sometimes, their prices deviate from the value of the underlying assets. Also, ETFs are not always the best option for tax efficiency, as they generate taxable returns. Moreover, like any investment, ETFs carry risks. This primarily includes market risk and the likelihood of loss of principal.\n\nIs ETF better than mutual fund?\n\nETFs can be considered better than mutual funds for certain investors due to their lower expense ratios, intraday trading flexibility, and tax efficiency. However, mutual funds may offer automatic investment strategies and professional management, making them suitable for those who prefer a more hands-off approach to investing.\n\nIs ETF a good investment?\n\nYes, ETFs can be a good investment option, offering diversification, liquidity, and low costs. They provide exposure to various asset classes and sectors, making it easier for investors to build a balanced portfolio. However, individual goals and risk tolerance should be considered when investing in ETFs.\n\nDo ETFs pay dividends?\n\nETFs can pay dividends if the securities they hold generate dividend income. Dividends paid by the underlying companies are collected by the ETF provider and passed on to investors, usually on a quarterly basis, in proportion to the number of ETF units held. If the underlying holdings do not pay dividends, the ETF will not distribute any. Some ETFs are specifically designed to focus on dividend-paying companies and are commonly referred to as dividend ETFs.\n\nCan you sell an ETF at any time?\n\nYes, ETFs can be traded on the stock exchange throughout market hours, similar to individual stocks. This allows investors to buy or sell ETF units during the trading day and respond to real-time price movements. In contrast, mutual fund transactions are processed only after market hours at the day’s closing net asset value.\n\nDo ETFs pay dividends?\n\nYes, ETFs may pay dividends if the underlying securities in the fund distribute dividends. When companies included in the ETF declare dividends, the fund collects this income and passes it on to investors based on the number of ETF units they hold. These payouts are usually distributed periodically, such as quarterly. However, if the ETF’s underlying assets do not generate dividend income, the ETF will not provide dividend payouts. Some ETFs are specifically designed to focus on dividend-paying companies and aim to generate regular income for investors.\n\nCan you sell an ETF at any time?\n\nYes, ETFs can generally be bought or sold anytime during market trading hours through stock exchanges. This allows investors to trade ETF units throughout the day and potentially benefit from price movements during the trading session. In contrast, mutual funds are usually transacted at the day’s closing net asset value (NAV), which is calculated after the market closes.\n\nShow More Show Less\n\n## Related Articles\n- [![](https:\/\/www.bajajfinserv.in\/content\/dam\/bajajfinserv-investment-marketplace\/adp\/what-is-a-folio-number.jpg)Mutual Fund Units 7584 3 mins read](https:\/\/www.bajajfinserv.in\/investments\/mutual-fund-units \"Mutual Fund Units\")\n- [![](https:\/\/cms-assets.bajajfinserv.in\/is\/image\/bajajfinance\/a-beginners-guide-to-mutual-fund-asset-classes?scl=1)Asset Classes 750 4 mins](https:\/\/www.bajajfinserv.in\/investments\/understanding-mutual-fund-asset-classes \"Asset Classes\")\n\n## Related Videos\n- [![Fixed Deposits versus other investment options](https:\/\/cms-assets.bajajfinserv.in\/is\/image\/bajajfinance\/gcc-623d4f9a-e2bc-4a94-a926-3561e3653a59-1?scl=1) 00:24 ‌ Fixed Deposits versus other investment options]()\n\n## Bajaj Finserv app for all your financial needs and goals\nTrusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.\n\nYou can use the Bajaj Finserv App to:\n\n- Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.\n- Invest in fixed deposits and mutual funds on the app.\n- Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.\n- Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.\n- Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.\n- Shop from over 100+ brand partners that offer a diverse range of products and services.\n- Use specialised tools like EMI calculators, SIP Calculators\n- Check your credit score, download loan statements and even get quick customer support—all on the app.\n\nDownload the Bajaj Finserv App today and experience the convenience of managing your finances on one app.\n\n## Do more with the Bajaj Finserv App\\!\nUPI, Wallet, Loans, Investments, Cards, Shopping and more\n\n[GET THE APP](https:\/\/bfl.onelink.me\/857331112\/1w7dctih \"GET THE APP\")\n\n## Disclaimer\nBajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.\n\nThe information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.\n\nThis information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.\n\nDisclaimer:\n\nBajaj Finance Limited (\"BFL\") is registered with the Association of Mutual Funds in India (\"AMFI\") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319\n\nBFL does NOT:\n\n(i) provide investment advisory services in any manner or form:\n\n(ii) carry customized\/personalized suitability assessment:\n\n(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.\n\nIn addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme\/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price\/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other\/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.\n\nInvestment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.\n\nDisclaimer on Risk-O-Meter:\n\nInvestors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.\n\n**Disclosure:** Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law \/ regulation.\n\n### Please wait\nYour page is almost ready\n\n×\n\nGo To Top\n\n### Languages\n- [English - EN](https:\/\/www.bajajfinserv.in\/investments\/what-is-an-etf)\n- [हिंदी - HI (BETA)](https:\/\/www.bajajfinserv.in\/hindi\/investments\/what-is-an-etf)\n\n### Application Forms\n- [Personal Loan](https:\/\/www.bajajfinserv.in\/personal-loan \"Personal Loan\")\n- [Business Loan](https:\/\/www.bajajfinserv.in\/business-loan \"Business Loan\")\n- [Home Loan](https:\/\/www.bajajfinserv.in\/home-loan \"Home Loan\")\n- [Gold Loan](https:\/\/www.bajajfinserv.in\/gold-loan \"Gold Loan\")\n- [Insta EMI Card](https:\/\/www.bajajfinserv.in\/insta-emi-card \"Insta EMI Card\")\n- [Wallet Care](https:\/\/www.bajajfinserv.in\/marketplace\/pocketInsurance\/?product=WalletCare&product_code=WPCP \"Wallet Care\")\n- [Health 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Loan](https:\/\/www.bajajfinserv.in\/insta-personal-loan \"Insta Personal Loan\")\n- [Business Loan](https:\/\/www.bajajfinserv.in\/business-loan \"Business Loan\")\n- [Home Loan](https:\/\/www.bajajfinserv.in\/home-loan \"Home Loan\")\n- [Gold Loan](https:\/\/www.bajajfinserv.in\/gold-loan \"Gold Loan\")\n- [MSME Loan](https:\/\/www.bajajfinserv.in\/sme-msme-loan \"MSME Loan\")\n- [Mortgage Loan](https:\/\/www.bajajfinserv.in\/mortgage-loan \"Mortgage Loan\")\n- [Loan Against Property](https:\/\/www.bajajfinserv.in\/loan-against-property \"Loan Against Property\")\n- [Education Loan on Property](https:\/\/www.bajajfinserv.in\/education-loan-on-property \"Education Loan on Property\")\n- [Personal Loan for Self-employed Individuals](https:\/\/www.bajajfinserv.in\/personal-loan-for-self-employed \"Personal Loan for Self-employed Individuals\")\n- [Two-wheeler Loan](https:\/\/www.bajajfinserv.in\/two-wheeler-loan \"Two-wheeler Loan\")\n- [New Car Finance](https:\/\/www.bajajfinserv.in\/new-car-finance \"New Car Finance\")\n- [Used Car Loan](https:\/\/www.bajajfinserv.in\/used-car-loan \"Used Car Loan\")\n- [Loan Against Car](https:\/\/www.bajajfinserv.in\/loan-against-car \"Loan Against Car\")\n- [Car Loan Balance Transfer and Top-up](https:\/\/www.bajajfinserv.in\/car-loan-balance-transfer-and-top-up \"Car Loan Balance Transfer and Top-up\")\n- [Used Cars and Loan](https:\/\/www.bajajfinserv.in\/used-cars-and-loan \"Used Cars and Loan\")\n- [Secured Business Loan](https:\/\/www.bajajfinserv.in\/secured-business-loan \"Secured Business Loan\")\n- [Secured Business Loan Balance Transfer](https:\/\/www.bajajfinserv.in\/secured-business-loan-balance-transfer \"Secured Business Loan Balance Transfer\")\n- [New Tractor Loan](https:\/\/www.bajajfinserv.in\/bmall\/all-tractors \"New Tractor Loan\")\n- [Used Tractor Loan](https:\/\/www.bajajfinserv.in\/used-tractor-loan \"Used Tractor Loan\")\n- [Loan Against Tractor](https:\/\/www.bajajfinserv.in\/loan-against-tractor \"Loan Against Tractor\")\n- [Tractor Loan Balance Transfer](https:\/\/www.bajajfinserv.in\/tractor-loan-balance-transfer \"Tractor Loan Balance Transfer\")\n- [Loan for Doctors](https:\/\/www.bajajfinserv.in\/doctor-loan \"Loan for  Doctors\")\n- [Loan for Chartered Accountants](https:\/\/www.bajajfinserv.in\/chartered-accountant-loan \"Loan for Chartered Accountants\")\n- [Loan for Lawyers](https:\/\/www.bajajfinserv.in\/loan-for-lawyers \"Loan for Lawyers\")\n\n### Insurance\n- [Insurance](https:\/\/www.bajajfinserv.in\/insurance \"Insurance\")\n- [Health Insurance](https:\/\/www.bajajfinserv.in\/insurance\/health-insurance-all-products \"Health Insurance\")\n- [Life insurance](https:\/\/www.bajajfinserv.in\/insurance\/term-insurance-plans \"Life insurance\")\n- [Term Insurance](https:\/\/www.bajajfinserv.in\/insurance\/term-insurance-plans \"Term Insurance\")\n- [ULIP Plans](https:\/\/www.bajajfinserv.in\/insurance\/ulip-plans?utm_source=WEB&utm_medium=ULIP&utm_campaign=ULIP&utm_term=ULIP&utm_content=ULIP \"ULIP Plans\")\n- [Car Insurance](https:\/\/www.bajajfinserv.in\/insurance\/car-insurance-all-products \"Car Insurance\")\n- [Pocket Insurance](https:\/\/www.bajajfinserv.in\/insurance\/pocket-insurance-all-products \"Pocket Insurance\")\n- [Investment Plans](https:\/\/www.bajajfinserv.in\/insurance\/investment-plans-all-products \"Investment Plans\")\n- [Appliances Extended Warranty](https:\/\/www.bajajfinserv.in\/insurance\/appliances-extended-warranty-all-products \"Appliances Extended Warranty\")\n- [Pocket Subscription](https:\/\/www.bajajfinserv.in\/insurance\/pocket-subscription-all-products \"Pocket Subscription\")\n\n### Finance for Professionals\n- [Loan for Doctors](https:\/\/www.bajajfinserv.in\/doctor-loan \"Loan for Doctors\")\n- [Loan for Chartered Accountants](https:\/\/www.bajajfinserv.in\/chartered-accountant-loan \"Loan for Chartered Accountants\")\n\n### Investments\n- [Fixed Deposit](https:\/\/www.bajajfinserv.in\/investments\/fixed-deposit \"Fixed Deposit\")\n- [Open Demat Account](https:\/\/www.bajajfinserv.in\/open-demat-account \"Open Demat Account\")\n- [Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/mutual-funds \"Mutual Funds\")\n- [NFO (New Fund Offer)](https:\/\/www.bajajfinserv.in\/investments\/nfo \"NFO (New Fund Offer)\")\n- [ELSS Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/elss-mutual-funds \"ELSS Mutual Funds\")\n- [Equity Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/equity-mutual-funds \"Equity Mutual Funds\")\n- [Hybrid Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/hybrid-mutual-funds \"Hybrid Mutual Funds\")\n- [Debt Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/debt-mutual-funds \"Debt Mutual Funds\")\n- [Multi Cap Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/multi-cap-mutual-funds \"Multi Cap Mutual Funds\")\n- [Large Cap Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/large-cap-mutual-funds \"Large Cap Mutual Funds\")\n- [Mid Cap Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/mid-cap-mutual-funds \"Mid Cap Mutual Funds\")\n- [Small Cap Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/small-cap-mutual-funds \"Small Cap Mutual Funds\")\n- [Liquid Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/liquid-mutual-funds \"Liquid Mutual Funds\")\n- [Aggressive Hybrid Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/aggressive-hybrid-funds \"Aggressive Hybrid Mutual Funds\")\n\n### Pocket Subscription\n- [Mobile Protection Plan](https:\/\/www.bajajfinserv.in\/insurance\/mobile-screen-insurance \"Mobile Protection Plan\")\n- [Wallet Care](https:\/\/www.bajajfinserv.in\/insurance\/wallet-care \"Wallet Care\")\n- [Fonesafe Lite](https:\/\/www.bajajfinserv.in\/insurance\/fonesafe-lite \"Fonesafe Lite\")\n- [Neuro Care Plan](https:\/\/www.bajajfinserv.in\/insurance\/neuro-care \"Neuro Care Plan\")\n- [Health Prime Max](https:\/\/www.bajajfinserv.in\/insurance\/health-prime-max \"Health Prime Max\")\n- [Cpp Road Assist](https:\/\/www.bajajfinserv.in\/insurance\/cpp-road-assist \"Cpp Road Assist\")\n- [Healthy Body Package](https:\/\/www.bajajfinserv.in\/insurance\/healthy-body-package \"Healthy Body Package\")\n\n### Bajaj Mall\n- [Smartphones](https:\/\/www.bajajfinserv.in\/bmall\/mobile-phones\/latest-smartphones \"Smartphones\")\n- [Mattress](https:\/\/www.bajajfinserv.in\/bmall\/mattresses \"Mattress\")\n- [Smartwatches](https:\/\/www.bajajfinserv.in\/bmall\/smart-watches \"Smartwatches\")\n- [Cycles](https:\/\/www.bajajfinserv.in\/bmall\/cycles \"Cycles\")\n- [Music & Audio](https:\/\/www.bajajfinserv.in\/bmall\/music-and-audio \"Music & Audio\")\n- [Speakers](https:\/\/www.bajajfinserv.in\/bmall\/speakers \"Speakers\")\n- [Water Purifiers](https:\/\/www.bajajfinserv.in\/bmall\/water-purifiers \"Water Purifiers\")\n- [Laptops](https:\/\/www.bajajfinserv.in\/bmall\/laptops \"Laptops\")\n- [Two-wheeler](https:\/\/www.bajajfinserv.in\/bmall\/two-wheelers \"Two-wheeler\")\n- [Washing Machine](https:\/\/www.bajajfinserv.in\/bmall\/washing-machines \"Washing Machine\")\n- [Televisions](https:\/\/www.bajajfinserv.in\/bmall\/televisions \"Televisions\")\n- [Air Conditioner](https:\/\/www.bajajfinserv.in\/bmall\/air-conditioners.html \"Air Conditioner\")\n- [Refrigerators](https:\/\/www.bajajfinserv.in\/bmall\/refrigerators \"Refrigerators\")\n- [Furniture](https:\/\/www.bajajfinserv.in\/bmall\/furniture \"Furniture\")\n- [Tractor](https:\/\/www.bajajfinserv.in\/tractor-world \"Tractor\")\n\n### Services\n- [Sign-in to our Customer Portal (My Account)](https:\/\/www.bajajfinserv.in\/myaccountlogin?Source=Login \"Sign-in to our Customer Portal (My Account)\")\n- [Manage your Profile](https:\/\/www.bajajfinserv.in\/service-guides\/manage-your-my-account-profile \"Manage your Profile\")\n- [Manage your Mandate](https:\/\/www.bajajfinserv.in\/service-guides\/manage-your-mandate-in-my-account \"Manage your Mandate\")\n- [Manage your Loans](https:\/\/www.bajajfinserv.in\/service-guides\/manage-your-loans-in-my-account \"Manage your Loans\")\n- [Manage your Flexi Loans](https:\/\/www.bajajfinserv.in\/service-guides\/manage-your-flexi-loans-in-my-account \"Manage your Flexi Loans\")\n- [Manage your Insta EMI card](https:\/\/www.bajajfinserv.in\/service-guides\/manage-your-insta-emi-card-in-my-account \"Manage your Insta EMI card\")\n- [Manage your Fixed Deposit](https:\/\/www.bajajfinserv.in\/service-guides\/manage-your-fixed-deposits-in-my-account \"Manage your Fixed Deposit\")\n\n### Wallets & Cards\n- [Wallet](https:\/\/www.bajajfinserv.in\/e-wallet-payment \"Wallet\")\n- [Bajaj Finserv Insta EMI Card](https:\/\/www.bajajfinserv.in\/insta-emi-card \"Bajaj Finserv Insta EMI Card\")\n\n### Value Added Services\n- [Gold Rate](https:\/\/www.bajajfinserv.in\/gold-rate-today-in-india \"Gold Rate\")\n\n### Payments\n- [All Payments](https:\/\/www.bajajfinserv.in\/bajaj-pay \"All Payments\")\n- [Wallet](https:\/\/www.bajajfinserv.in\/e-wallet-payment \"Wallet&#9;\")\n- [UPI](https:\/\/www.bajajfinserv.in\/upi \"UPI\")\n- [Mobile recharge](https:\/\/www.bajajfinserv.in\/prepaid-mobile-recharge \"Mobile recharge\")\n- [Electricity Bill Payment](https:\/\/www.bajajfinserv.in\/electricity-bill-payment \"Electricity Bill Payment\")\n- [DTH Recharge](https:\/\/www.bajajfinserv.in\/dth-recharge \"DTH Recharge\")\n- [Loan Repayment](https:\/\/www.bajajfinserv.in\/loan-repayment \"Loan Repayment\")\n- [Gas Booking](https:\/\/www.bajajfinserv.in\/gas-booking \"Gas Booking\")\n- [Rewards](https:\/\/www.bajajfinserv.in\/rewards-and-offers \"Rewards\")\n- [Bajaj Pay FASTAg](https:\/\/www.bajajfinserv.in\/bajaj-pay-fastag \"Bajaj Pay FASTAg\")\n- [Bajaj Pay Wallet KYC Upgrade](https:\/\/www.bajajfinserv.in\/wallet-kyc-upgrade \"Bajaj Pay Wallet KYC Upgrade\")\n- [Bajaj Pay FASTAg Registration](https:\/\/www.bajajfinserv.in\/fastag-vehicle-registration \"Bajaj Pay FASTAg Registration\")\n- [Bajaj Pay FASTag Replacement](https:\/\/www.bajajfinserv.in\/fastag-replacement-process \"Bajaj Pay FASTag Replacement\")\n- [Bajaj Pay FASTag Closure](https:\/\/www.bajajfinserv.in\/fastag-closure \"Bajaj Pay FASTag Closure\")\n\n[Pre-approved Offers](https:\/\/www.bajajfinserv.in\/pre-approved-loan-offers)\n\n[Offer World](https:\/\/www.bajajfinserv.in\/webform\/v1\/offersModulenew\/offer?category=All%20Deals%20%26%20Offers)\n\n[Article and Insights](https:\/\/www.bajajfinserv.in\/articles)\n\n### Calculators\n- [Personal Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/personal-loan-emi-calculator \"Personal Loan EMI Calculator\")\n- [Home Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/home-loan-emi-calculator \"Home Loan EMI Calculator\")\n- [Home Loan Eligibility Calculator](https:\/\/www.bajajfinserv.in\/home-loan-eligibility-calculator \"Home Loan Eligibility Calculator\")\n- [Business Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/business-loan-emi-calculator \"Business Loan EMI Calculator\")\n- [Personal Loan Eligibility Calculator](https:\/\/www.bajajfinserv.in\/personal-loan-eligibility-calculator \"Personal Loan Eligibility Calculator\")\n- [Loan Against Property EMI Calculator](https:\/\/www.bajajfinserv.in\/loan-against-property-emi-calculator \"Loan Against Property EMI Calculator\")\n- [Education Loan on Property Calculator](https:\/\/www.bajajfinserv.in\/education-loan-on-property-calculator \"Education Loan on Property Calculator\")\n- [FD Calculator](https:\/\/www.bajajfinserv.in\/investments\/fixed-deposit-calculator \"FD Calculator\")\n- [Gratuity Calculator](https:\/\/www.bajajfinserv.in\/investments\/gratuity-calculator \"Gratuity Calculator\")\n- [Income Tax Calculator](https:\/\/www.bajajfinserv.in\/income-tax-calculator \"Income Tax Calculator\")\n- [Top-up Loan Calculator](https:\/\/www.bajajfinserv.in\/top-up-loan \"Top-up Loan Calculator\")\n- [Part-prepayment Calculator](https:\/\/www.bajajfinserv.in\/home-loan-part-pre-payment-calculator \"Part-prepayment Calculator\")\n- [GST Calculator](https:\/\/www.bajajfinserv.in\/gst-calculator \"GST Calculator\")\n- [Gold Loan Calculator](https:\/\/www.bajajfinserv.in\/gold-loan-calculator \"Gold Loan Calculator\")\n- [EMI Calculator](https:\/\/www.bajajfinserv.in\/emi-calculator \"EMI Calculator\")\n- [Used Car Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/used-car-loan-emi-calculator \"Used Car Loan EMI Calculator\")\n- [Interest Calculator](https:\/\/www.bajajfinserv.in\/interest-calculator \"Interest Calculator\")\n- [SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/sip-calculator \"SIP Calculator\")\n- [Flexi Day Wise Interest Calculator](https:\/\/www.bajajfinserv.in\/flexi-day-wise-interest-calculator \"Flexi Day Wise Interest Calculator\")\n- [Flexi Transaction Calculator](https:\/\/www.bajajfinserv.in\/flexi-transaction-calculator \"Flexi Transaction Calculator\")\n- [Secured Business Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/secured-business-loan-emi-calculator \"Secured Business Loan EMI Calculator\")\n- [Secured Business Loan Eligibility Calculator](https:\/\/www.bajajfinserv.in\/secured-business-loan-eligibility-calculator \"Secured Business Loan Eligibility Calculator\")\n- [Lumpsum Calculator](https:\/\/www.bajajfinserv.in\/investments\/lumpsum-calculator \"Lumpsum Calculator\")\n- [Step Up SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/step-up-sip-calculator \"Step Up SIP Calculator\")\n- [BMI Calculator](https:\/\/www.bajajfinserv.in\/insurance\/bmi-calculator \"BMI Calculator\")\n- [IDV Calculator](https:\/\/www.bajajfinserv.in\/insurance\/idv-calculator \"IDV Calculator\")\n- [Commercial Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/commercial-loan-emi-calculator \"Commercial Loan EMI Calculator\")\n- [Medical Equipment Finance EMI Calculator](https:\/\/www.bajajfinserv.in\/medical-equipment-finance-emi-calculator \"Medical Equipment Finance EMI Calculator\")\n- [Term Loan Calculator](https:\/\/www.bajajfinserv.in\/term-loan-calculator \"Term Loan Calculator\")\n- [Equipment Machinery Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/equipment-machinery-loan-emi-calculator \"Equipment Machinery Loan EMI Calculator\")\n- [Doctor Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/doctor-loan-emi-calculator \"Doctor Loan EMI Calculator\")\n- [Doctor Loan Eligibility Calculator](https:\/\/www.bajajfinserv.in\/doctor-loan-eligibility-calculator \"Doctor Loan Eligibility Calculator\")\n- [Chartered Accountant Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/chartered-accountant-loan-emi-calculator \"Chartered Accountant Loan EMI Calculator\")\n- [Simple Interest Calculator](https:\/\/www.bajajfinserv.in\/simple-interest-calculator \"Simple Interest Calculator\")\n- [Compound Interest Calculator](https:\/\/www.bajajfinserv.in\/compound-interest-calculator \"Compound Interest Calculator\")\n- [Brokerage Calculator](https:\/\/www.bajajfinserv.in\/brokerage-calculator \"Brokerage Calculator\")\n- [Mutual Fund Calculator](https:\/\/www.bajajfinserv.in\/investments\/mutual-fund-calculator \"Mutual Fund Calculator\")\n- [Two wheeler Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/two-wheeler-loan-calculator \"Two wheeler Loan EMI Calculator\")\n- [New Car Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/new-car-finance-emi-calculator \"New Car Loan EMI Calculator\")\n- [Used Tractor Loan EMI Calculator](https:\/\/www.bajajfinserv.in\/tractor-loan-emi-calculator \"Used Tractor Loan EMI Calculator\")\n\n### Important Links\n- [Moratorium Policy March 2020](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/moratorium-bflpdf?scl=1&fmt=pdf \"Moratorium Policy March 2020\")\n- [Information Security Practices](https:\/\/www.bajajfinserv.in\/payment-fraud-awareness \"Information Security Practices\")\n- [Information Security Measures](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/security-measurespdf?scl=1&fmt=pdf \"Information Security Measures\")\n- [Citizens Charter](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/bfl-citizens-charter-30-th-may-25pdf?scl=1&fmt=pdf \"Citizens Charter\")\n- [Privacy Policy](https:\/\/www.bajajfinserv.in\/privacy-policy \"Privacy Policy\")\n- [Phishing](https:\/\/www.bajajfinserv.in\/phishing \"Phishing\")\n- [Disclaimer](https:\/\/www.bajajfinserv.in\/disclaimer-page \"Disclaimer\")\n- [Forms Centre](https:\/\/www.bajajfinserv.in\/forms-centre \"Forms Centre\")\n- [Fees & Charges](https:\/\/www.bajajfinserv.in\/all-fees-and-charges \"Fees & Charges\")\n- [Fair Practices Code](https:\/\/www.bajajfinserv.in\/investment-about-us-fair-practices-code \"Fair Practices Code\")\n- [Interest Rate Policy](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/interest-rate-policy-mar-25pdf?scl=1&fmt=pdf \"Interest Rate Policy\")\n- [Disclosures](https:\/\/www.bajajfinserv.in\/disclosures-page \"Disclosures\")\n- [Cautionary Notice](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/caution-noticepdf?scl=1&fmt=pdf \"Cautionary Notice\")\n- [Whistle Blower Policy](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/whistle-blower-14-may-2025pdf?scl=1&fmt=pdf \"Whistle Blower Policy\")\n- [Confidential Feedback](https:\/\/www.bajajfinserv.in\/confidential-feedback \"Confidential Feedback\")\n- [Resolution Plan 2.0](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/framework-2.0-for-covid19-related-stressdocxpdf?scl=1&fmt=pdf \"Resolution Plan 2.0\")\n- [Terms & Conditions](https:\/\/www.bajajfinserv.in\/terms-and-conditions \"Terms & Conditions\")\n- [Resolution Plan 2.0 FAQs](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/faqs-2021pdf?scl=1&fmt=pdf \"Resolution Plan 2.0 FAQs\")\n- [Ombudsman Scheme](https:\/\/www.bajajfinserv.in\/finance-corporate-ombudsman \"Ombudsman Scheme\")\n- [SMA\/NPA Account Classification](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/classification-of-loan-account-as-sma-and-npa-feb-2025pdf?scl=1&fmt=pdf \"SMA\/NPA Account Classification\")\n- [Terms of Use](https:\/\/www.bajajfinserv.in\/terms-of-use \"Terms of Use\")\n- [Sachet](https:\/\/sachet.rbi.org.in\/ \"Sachet\")\n- [Handover of Property Documents](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/handover-of-property-documentspdf?scl=1&fmt=pdf \"Handover of Property Documents\")\n- [Notices](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/cooling-off-period-cancellation-customer-information-note-02-05-2025pdf?scl=1&fmt=pdf \"Notices\")\n- [Policy on Fees & Charges](https:\/\/www.bajajfinserv.in\/policy-on-fees-and-charges \"Policy on Fees & Charges\")\n- [BFL - Floating Reference Rates](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/bajaj-finance-ltd-floating-reference-rates-feb-26?scl=1&fmt=pdf \"BFL - Floating Reference Rates\")\n- [Suppliers Code of Conduct](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/suppliers-code-of-conduct-29-09?scl=1&fmt=pdf \"Suppliers Code of Conduct\")\n- [Model Code of Conduct](https:\/\/cms-assets.bajajfinserv.in\/is\/content\/bajajfinance\/model-code-of-conduct-code-for-the-service-provider-29-09?scl=1&fmt=pdf \"Model Code of Conduct\")\n\n### Reach Us\n- [Contact us](https:\/\/www.bajajfinserv.in\/reach-us \"Contact us\")\n- [Raise A 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Office\nAkurdi, Pune - 411035  \n Ph No.: 020 7157-6403  \n Email ID: [investor.service@bajajfinserv.in](mailto:investor.service@bajajfinserv.in)\n\n### Corporate Identity Number (CIN)\nL65910MH1987PLC042961\n\n### IRDAI Corporate Agency (Composite) Regn No.\nCA0101  \n (Valid till 31-Mar-2028)\n### URN - WEB\/BFL\/23-24\/1\/V1\n\n### Bajaj Finserv Limited Regd. Office\nBajaj Auto Limited Complex Mumbai - Pune Road,  \n Pune - 411035 MH (IN)  \n Ph No.: 020 7157-6064  \n Email ID: [investors@bajajfinserv.in](mailto:investors@bajajfinserv.in)\n\n### Corporate Identity Number (CIN)\nL65923PN2007PLC130075\n\n### Our Companies\n- [Bajaj Finserv Ltd.](https:\/\/www.bajajfinserv.in\/corporate-bajaj-finserv \"Bajaj Finserv Ltd.\")\n- [Bajaj Finance Ltd.](https:\/\/www.bajajfinserv.in\/corporate-bajaj-finance \"Bajaj Finance Ltd.\")\n- [Bajaj General Insurance Limited](https:\/\/www.bajajgeneralinsurance.com\/ \"Bajaj General Insurance Limited\")\n- [Bajaj Life Insurance Limited](https:\/\/www.bajajlifeinsurance.com\/ \"Bajaj Life Insurance Limited\")\n- [Bajaj Markets](https:\/\/www.bajajfinservmarkets.in\/ \"Bajaj Markets\")\n- [Bajaj Housing Finance Ltd.](https:\/\/www.bajajhousingfinance.in\/ \"Bajaj Housing Finance Ltd.\")\n- [Bajaj Broking](https:\/\/www.bajajbroking.in\/ \"Bajaj Broking\")\n- [Bajaj Finserv Health Ltd.](https:\/\/www.bajajfinservhealth.in\/ \"Bajaj Finserv Health Ltd.\")\n- [Bajaj Finserv Asset Management Ltd.](https:\/\/www.bajajamc.com\/ \"Bajaj Finserv Asset Management Ltd.\")\n\nDownload the Bajaj Finserv App\n\n![Locate Us](https:\/\/cms-assets.bajajfinserv.in\/is\/image\/bajajfinance\/company-name-footer?scl=1&fmt=png-alpha)\n\n© Bajaj Finserv 2007-2026. All rights reserved.","attrs_readable_markdown":"1. [Home](https:\/\/www.bajajfinserv.in\/ \"Home\")\n2. [Investments](https:\/\/www.bajajfinserv.in\/investments \"Investments\")\n3. [Mutual Funds](https:\/\/www.bajajfinserv.in\/investments\/mutual-funds \"Mutual Funds\")\n4. What is an ETF\n\n324 3 mins\n\n13-January-2026\n\nETF's full form is an exchange-traded fund. It is a type of security that mirrors the performance of an index, commodity, bonds, or collection of assets, much like an index fund. In simple words, ETFs are funds that track various indexes, such as the CNX Nifty or the BSE Sensex, among others.\n\nIn recent years, India's financial markets have witnessed substantial growth and innovation, providing investors with an array of investment options. Among these, Exchange-Traded Funds (ETFs) have emerged as a popular and accessible mutual fund investment option, gaining significant traction among Indian investors.\n\nETFs have brought a new dimension to the Indian investment landscape, offering benefits that align well with the preferences and requirements of Indian investors. In this article, we will learn about the ETF meaning, how ETF work, and know about the different types of ETFs available. Also, we will check their advantages and associated risks and learn some key factors to consider before investing in ETFs.\n\n## **What Is an Exchange-Traded Fund (ETF)?**\nAn Exchange-Traded Fund (ETF) is a marketable financial product traded on stock exchanges, much like individual stocks. The term ETF reflects its nature as an investment fund that holds a diverse portfolio of assets. Unlike a single stock representing one company, an ETF consists of a collection of securities. These may include stocks, bonds, commodities, or other instruments, providing investors with a convenient way to achieve diversification.\n\nETFs are designed to track the performance of specific indices, such as the CNX Nifty or the BSE Sensex, making them an efficient way for investors to gain exposure to broader market movements. One of the primary advantages of ETFs is their liquidity; investors can buy and sell shares throughout the trading day at market prices. Additionally, ETFs typically have lower expense ratios compared to [mutual funds](https:\/\/www.bajajfinserv.in\/investments\/mutual-funds), making them an attractive option for cost-conscious investors. With their diverse range of offerings and easy accessibility, ETFs have become increasingly popular in recent years, appealing to both novice and seasoned investors seeking to diversify their portfolios.\n\nLet's explain the process of creating and redeeming ETF units using an example of a commodity, like gold:\n\nImagine there's an ETF that tracks the performance of gold prices. To make this ETF work, a special player called the \"authorized participant\" (AP) comes into the picture. APs are usually big financial institutions or market makers.\n\n## Here's how it works:\n1. **Creating ETF Units**:  \n   When there is demand for more shares of the [gold ETF](https:\/\/www.bajajfinserv.in\/investments\/gold-etf), the AP steps in. They acquire the actual gold, just like physical gold bars or gold certificates, that will represent the value of t’e ETF's shares. They then deliver this gold to the ETF's manager\/ AMC, who takes care of the ETF's assets.  \n   In return for delivering the gold, the ETF's manager\/ [AMC](https:\/\/www.bajajfinserv.in\/investments\/unravelling-the-role-of-asset-management-companies) creates new units of the ETF. These new units are then transferred to the AP. So, the AP now has units in the ETF that represent a portion of the total gold held by the ETF.\n2. **Redeeming ETF Units:**  \n   Now, let's say an investor wants to sell their units of the gold ETF. The AP buys those ETF units from the investor.  \n   When the investor sells their ETF units, the AP takes those units and redeems them back to the ETF's manager\/ AMC. In exchange, the ETF's manager gives the AP the corresponding amount of actual gold, just like the gold bars or certificates or cash that the ETF is holding.\n## Why invest in ETFs?\nInvesting in Exchange-Traded Funds (ETFs) offers numerous advantages, making them an attractive option for various investors. ETFs provide instant diversification by holding a basket of securities, reducing risk compared to investing in individual assets. They are cost-effective due to their low expense ratios and typically lower management fees. ETFs also offer flexibility, as they can be traded like stocks throughout market hours, providing liquidity and ease of access. Additionally, they cater to various investment goals, with options ranging from equity and bonds to sector-specific and international markets. Their transparency ensures that investors know the underlying holdings, enabling informed decisions.\n\n|   |   |\n|---|---|\n| **Reason** | **Description** |\n| Diversification | ETFs hold a mix of securities, spreading risk across different investments. |\n| Cost-effective | Low expense ratios and minimal management fees compared to mutual funds. |\n| Liquidity and flexibility | Traded like stocks, ETFs allow buying and selling during market hours. |\n| Variety of options | Offers access to equities, bonds, sectors, and international markets. |\n| Transparency | Holdings are disclosed regularly for investor awareness. |\n## Keeping the ETF's Market Price in Line:\nThe process of creating and redeeming ETF units is essential for making sure the price of the ETF on the stock exchange stays very close to the actual value of the gold it holds. The Buy and Sell price of ETFs should lie in the close range of its real-time [NAV](https:\/\/www.bajajfinserv.in\/investments\/nav-explained) for maintaining product efficiency.\n\nIn summary, the creation and redemption mechanism with the help of authorized participants (APs) ensures that the price of the gold ETF on the stock exchange closely reflects the true value of the gold it holds. This way, investors can buy or sell shares of the gold ETF at a price that is fair and transparent, based on the actual value of the underlying commodity - gold.\n\n## **Types of ETFs in India**\nIndian investors can choose from a diverse range of ETFs to suit their investment objectives and risk appetites. Some of the common types of ETFs available in the Indian market include:\n\n1. **Index ETFs:** These ETFs aim to replicate the performance of a specific stock market index, such as the Nifty 50 or the Sensex. They provide investors with exposure to a broad market segment or a specific sector\/ Smart-Beta Strategy.\n2. **Gold\/ Silver ETFs:** Gold\/ Silver ETFs allow investors to invest in the price movements of gold\/ silver without physically owning the precious metal.\n3. **Sectoral ETFs:** Sector-specific ETFs enable investors to focus on particular industries or sectors, like banking, technology, or energy, etc.\n4. **Bond ETFs:** Bond ETFs invest in benchmark indices of fixed-income securities, including government bonds and corporate bonds, catering to investors seeking income and stability\n5. **International ETFs:** These ETFs provide investors with exposure to international markets and assets via international Indices (viz. S\\&P 500, Nasdaq 100, etc) allowing them to diversify globally.\n6. **Smart Beta ETFs:** These ETFs utilize alternative index construction methodologies, focusing on factors like low volatility, high dividend yield, quality, momentum, Alpha, etc rather than traditional market capitalization-based indices.\n7. **Commodity ETFs:** These ETFs track the price movements of commodities like oil or precious metals.\n8. **Passive ETFs:** Passive ETFs aim to replicate the performance of a specific market index. In India, these funds commonly track indices such as the Nifty 50, Sensex, or sectoral indices. Since they simply mirror the index composition, passive ETFs generally have lower expense ratios and are widely used by investors seeking cost-efficient market exposure.\n9. **Actively Managed ETFs:** Unlike passive ETFs, actively managed ETFs do not track a specific index. Instead, professional fund managers actively select and manage securities in the portfolio based on market opportunities and research. While these ETFs offer the potential to outperform benchmarks, they typically have higher management costs compared to passive ETFs.\n10. **Bitcoin \/ Crypto ETFs:** Spot Bitcoin ETFs were approved by the U.S. Securities and Exchange Commission (SEC) in 2024, allowing investors in the U.S. to gain exposure to Bitcoin through traditional brokerage accounts. However, in India, cryptocurrency ETFs are not currently approved or listed on Indian exchanges, and investors cannot access such products through domestic ETF platforms.\n11. **Leveraged ETFs:** Leveraged ETFs aim to generate multiples of the returns of an underlying index, such as 2× or 3× the daily movement. These funds use derivatives and borrowed capital to amplify returns. However, leveraged ETFs are not widely available in the Indian ETF market, and Indian regulators generally take a cautious approach toward such high-risk products.\n## **Advantages of ETFs for Indian Investors**\n1. **Affordability:** ETFs offer a cost-effective investment solution with relatively lower [expense ratios](https:\/\/www.bajajfinserv.in\/investments\/what-is-expense-ratio), making them an attractive choice for cost-conscious Indian investors.\n2. **Diversification:** ETFs provide diversification by investing in a basket of securities, reducing exposure to individual stock risks.\n3. **Liquidity:** Being listed on stock exchanges, ETFs offer intraday liquidity, allowing investors to buy or sell units at prevailing market prices throughout the trading day.\n4. **Taxation:** Taxation for ETFs depend on the underlying stock. Index and sectoral ETFs are regarded as equity-oriented ETFs when it comes to tax. As a result, [short-term capital gains](https:\/\/www.bajajfinserv.in\/investments\/understanding-short-term-capital-gains-tax) on ETF units retained for less than a year are taxed at a rate of 15%. Long-term capital gains on units maintained for over a year are levied at a rate of 10%, without the benefit of indexation. Long-term capital gains up to Rs. 1 lakh are exempt from tax.  \n   Gold ETFs and international ETFs are treated as non-equity funds for taxation purposes. if ETF units are held for less than 36 months, any short-term gains are taxed according to the relevant income tax bracket. [Long-term capital gains](https:\/\/www.bajajfinserv.in\/investments\/understanding-long-term-capital-gains-tax) from units held longer than a year are subject to a 20% tax, considering the indexation benefit.  \n   A note to be included wherever tax rates are mentioned. The note to state that the tax rates mentioned above are excluding surcharge if any and cess.\n5. **Transparency:** ETFs regularly disclose their portfolios, NAVs enabling investors to make informed decisions about their investments.\n## **Exchange-Traded Funds (ETFs): Understanding Risks**\nExchange-Traded Funds (ETFs), like any other investment assets, come with [inherent risks](https:\/\/www.bajajfinserv.in\/investments\/what-is-inherent-risk) that investors need to be aware of before making investment decisions. Understanding these risks is essential to manage investments prudently and align them with individual financial goals and risk tolerance.\n\nLet's delve into some of the key risks associated with ETF investments in the Indian context:\n\n1. **Market Risk:** ETFs are subject to [market risk](https:\/\/www.bajajfinserv.in\/investments\/what-is-market-risk), which refers to the potential losses stemming from overall market movements. If the market experiences a downturn, the value of the underlying assets in the ETF's portfolio can decrease, leading to a decline in the ETF's net asset value ([NAV](https:\/\/www.bajajfinserv.in\/investments\/nav-explained)) and market price.\n2. **Tracking Error:** While ETFs aim to replicate the performance of a specific index or asset, there might be a slight disparity between the ETF's returns and the index it tracks. This difference is known as tracking error and can be influenced by factors such as transaction costs, management fees, and imperfect replication of the index.\n3. **Liquidity Risk:** Although ETFs are traded on stock exchanges, the [liquidity](https:\/\/www.bajajfinserv.in\/investments\/liquidity-risk) of certain ETFs may vary. In times of market stress or if the underlying assets are illiquid, it may become challenging to buy or sell ETF units at the desired price, potentially resulting in higher bid-ask spreads.\n4. **Concentration Risk:** Some ETFs are concentrated in specific sectors, industries, or [asset classes](https:\/\/www.bajajfinserv.in\/investments\/understanding-mutual-fund-asset-classes). If the particular sector or industry faces challenges or a significant event affects the asset class, the ETF's performance could be adversely impacted.\n5. **Currency Risk:** For ETFs with international exposure, fluctuations in currency exchange rates can affect the returns for Indian investors. Currency risk arises when the investment is denominated in foreign currency, and changes in exchange rates can either enhance or erode investment gains.\n6. **Counterparty Risk:** Some ETFs use financial derivatives or engage in securities lending to enhance returns. This introduces counterparty risk, which is the risk that the entity on the other side of the transaction might default or fail to fulfil its obligations.\n7. **Inherent Risk of Underlying Assets:** ETFs invest in a diversified basket of assets, but the risk associated with the underlying assets remains. For instance, equity ETFs may be exposed to risks associated with the individual stocks in the portfolio, while bond ETFs may face interest rate risk and [credit risk](https:\/\/www.bajajfinserv.in\/investments\/credit-risk).\n8. **Regulatory and Taxation Risks:** Changes in government regulations or tax laws can impact the returns and taxation of ETF investments, potentially affecting the attractiveness of certain ETFs.\n## Pros and Cons of ETFs\n**Pros**\n\n- **Diversified market exposure:** ETFs allow investors to gain exposure to multiple companies across sectors through indices such as Nifty 50, Sensex, or sectoral indices.\n- **Lower costs:** Most ETFs in India have relatively low expense ratios compared to actively managed mutual funds. Brokerage charges are also generally minimal.\n- **Diversification benefits:** By tracking a basket of securities, ETFs help reduce the risk associated with investing in a single stock.\n- **Targeted investment options:** Investors can choose ETFs focused on specific sectors, themes, commodities like gold, or broader market indices.\n\n**Cons**\n\n- **Higher costs for active ETFs:** Actively managed ETFs may have higher expense ratios compared to passive index-tracking ETFs.\n- **Limited diversification in sector ETFs:** ETFs focused on a single sector or theme may increase concentration risk.\n- **Liquidity concerns:** Some ETFs listed on Indian exchanges may have lower trading volumes, which can affect ease of buying or selling units at desired prices.\n## **How is an ETF different from an index fund?**\nAn ETF (exchange-traded fund) differs from an index fund primarily in trading mechanisms and pricing. ETFs trade on stock exchanges like individual stocks, allowing for intraday buying and selling at fluctuating market prices. In contrast, index funds are bought and sold at the end of the trading day at the net asset value (NAV). Additionally, ETFs often have lower expense ratios and can be more tax-efficient due to their unique structure, whereas index funds may have minimum investment requirements. Both aim to replicate the performance of a specific index, but their trading flexibility and cost structures vary significantly.\n\n## How do ETFs and mutual funds compare?\nETFs and mutual funds are both investment vehicles offering diversification, but they differ in structure, trading, and costs. ETFs trade on stock exchanges like individual stocks, allowing investors to buy and sell throughout market hours. In contrast, mutual funds are bought or redeemed at the day's Net Asset Value (NAV). ETFs typically have lower expense ratios due to their passive management approach, while mutual funds may have higher costs from active management. ETFs are more tax-efficient, as their structure minimises capital gains distributions. Mutual funds often require a minimum investment, but ETFs can be purchased in single units. While ETFs offer real-time pricing, mutual funds provide convenience through [systematic investment plans](https:\/\/www.bajajfinserv.in\/investments\/what-is-sip) (SIPs). Choosing between the two depends on an investor’s preferences for trading flexibility, cost structure, and investment strategy, with ETFs suiting short-term or cost-conscious investors and mutual funds appealing to those seeking long-term active management.\n\n## **Do ETFs provide diversity?**\nYes, ETFs provide diversity by offering exposure to a wide range of assets within a single investment. Each ETF typically holds a basket of securities, which may include stocks, bonds, commodities, or real estate, reflecting various sectors or market indices. This diversification reduces individual [investment risk](https:\/\/www.bajajfinserv.in\/investments\/investment-risk), as poor performance in one security can be balanced by gains in others. Additionally, investors can access niche markets or specific themes through targeted ETFs, enhancing their portfolio's breadth. Overall, ETFs serve as an effective tool for investors seeking to achieve a diversified investment strategy while maintaining liquidity and flexibility.\n\n## **How much do ETFs cost?**\nETFs are generally considered a cost-efficient investment option. The primary cost involved is the expense ratio, which covers fund management, administration, and operational expenses. For most equity ETFs, this expense ratio is relatively low compared to other investment products. In addition to this, investors may incur brokerage charges when buying or selling ETF units on the stock exchange. Some platforms may also apply small transaction or demat-related charges. Since ETFs are passively managed in most cases, their overall costs tend to remain lower, helping investors retain a larger share of their returns over the long term.\n\n## **ETF creation and redemption**\nETF creation and redemption is a process handled by authorised participants, usually large institutional investors. When demand for an ETF increases, authorised participants create new ETF units by delivering a basket of underlying securities to the fund house. In return, they receive ETF units, which are then sold on the stock exchange. Conversely, when supply exceeds demand, ETF units are redeemed by returning them to the fund house in exchange for the underlying securities. This mechanism helps keep the ETF’s market price close to its net asset value and ensures liquidity in the market.\n\n## **How to find the right ETFs for your portfolio**\nChoosing the right ETFs starts with understanding your investment goals, time horizon, and risk tolerance. Investors should first identify whether they want exposure to equities, debt, commodities, or international markets. Evaluating the ETF’s underlying index is equally important, as it determines performance and risk characteristics. Expense ratios should be compared, as lower costs can improve long-term returns. Liquidity is another key factor, so checking average trading volumes and bid-ask spreads is useful. Investors should also review the fund size and tracking error to assess efficiency. Aligning ETF selection with overall asset allocation helps create a balanced and goal-oriented portfolio.\n\n## **ETFs vs mutual funds vs stocks**\nWhen compared with other investment options, exchange-traded funds offer several distinct advantages. Lower costs, broad diversification, and flexibility are some of the reasons ETFs are widely preferred. Below is a comparison highlighting key differences between ETFs, mutual funds, and individual stocks.\n\n|   |   |   |   |\n|---|---|---|---|\n| **Aspect** | **Exchange-traded funds (ETFs)** | **Mutual funds** | **Individual stocks** |\n| Fees | Average equity ETF expense ratio is around 0.15% | Average equity mutual fund expense ratio is about 0.42%, along with possible additional charges | Brokerage or commission fees, often zero but may go up to \\$5 |\n| How to buy | Bought and sold during regular and extended market hours | Transactions are processed after market close at the day’s NAV | Bought and sold during regular and extended market hours |\n## **Factors to Consider Before Investing in ETFs**\n1. Investment Objective: Determine your investment goals, whether it's capital appreciation, income generation, or diversification. Choose an ETF that aligns with your objectives.\n2. Asset Class and Sector: ETFs cover various asset classes and sectors. Assess your [risk tolerance](https:\/\/www.bajajfinserv.in\/investments\/what-is-risk-tolerance) and preference for sectors like technology, healthcare, or commodities before investing.\n3. Expense Ratio: Evaluate the ETF's expense ratio, as lower fees can impact your overall returns. Look for cost-efficient options without compromising quality.\n4. Liquidity: Ensure the ETF has sufficient trading volume and liquidity to buy and sell shares without significant price fluctuations.\n5. Historical Performance: Examine the ETF's historical performance and its ability to track its underlying index accurately. Past performance isn't indicative of future results, but it provides insights into the ETF's tracking ability.\n## **Key takeaways**\n- **Trading mechanisms**: ETFs differ from index funds in their trading structure; ETFs trade on stock exchanges like individual stocks, allowing intraday transactions at fluctuating prices, while index funds are traded at the end of the day at their net asset value (NAV).\n- **Diversity in investment**: ETFs offer significant diversity by holding a collection of various securities, such as stocks, bonds, or commodities, which helps to mitigate individual investment risk and provides broader market exposure.\n- **Cost efficiency**: Generally, ETFs have lower expense ratios compared to index funds, making them a cost-effective option for investors seeking diversification and flexibility in their portfolios.\n## **Conclusion**\nWhile ETFs offer several advantages, it is crucial to recognize and manage the inherent risks associated with these investment vehicles. By adopting a well-informed and balanced approach, investors can leverage the [benefits of ETFs](https:\/\/www.bajajfinserv.in\/investments\/advantages-of-etfs) while navigating potential risks effectively. Consulting with a financial advisor and conducting thorough due diligence are essential steps to make informed investment decisions and align ETF investments with individual financial goals and risk tolerance.\n\nDiscover a wide selection of ETFs with comprehensive analysis for informed investing on the Bajaj Finserv platform.\n\nETFs provide diversification by investing in various stocks or bonds, effectively reducing overall portfolio risk. Moreover, they are easily accessible, allowing you to buy and sell throughout the trading day. Start your ETF investment journey with us today\\!\n\n## Essential tools for mutual fund investors\n|   |   |   |   |\n|---|---|---|---|\n| [Mutual Fund Calculator](https:\/\/www.bajajfinserv.in\/investments\/mutual-fund-calculator) | [Lumpsum Calculator](https:\/\/www.bajajfinserv.in\/investments\/lumpsum-calculator) | [Step Up SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/step-up-sip-calculator) | [Systematic Investment Plan Calculator](https:\/\/www.bajajfinserv.in\/investments\/sip-calculator) |\n| [SBI SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/sbi-sip-calculator) | [HDFC SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/hdfc-sip-calculator) | [Axis Bank SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/axis-bank-sip-calculator) | [ICICI SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/icici-sip-calculator) |\n| [Nippon India SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/nippon-india-sip-calculator) | [ABSL SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/aditya-birla-sun-life-sip-calculator) | [Groww SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/groww-sip-calculator) | [LIC SIP Calculator](https:\/\/www.bajajfinserv.in\/investments\/lic-sip-calculator) |\n\nFrequently Asked Questions\n\nExchange-Traded Funds (ETFs) are like baskets of assets, such as stocks, bonds, or commodities, that are traded on stock exchanges, providing investors with diversified exposure to these assets.\n\nThe \"best\" ETF depends on your investment goals. Choose based on your objectives and risk tolerance.\n\nYes, you can sell ETF shares anytime during market hours when the stock exchange is open. ETFs offer intraday liquidity, so you can trade them throughout the trading session.\n\nAn ETF, or exchange-traded fund, is marketable security. It is an investment that trades like a stock but represents a collection of assets, such as stocks, bonds, or commodities. The primary goal of an ETF is to match the performance of a specific index, like CNX Nifty or BSE Sensex. When you buy an ETF, you are investing in a portfolio that reflects the performance of that index.\n\nETFs can be a safe investment option if used wisely. They provide the benefits of diversification and flexibility. Indexed ETFs, which follow indexes like the S\\&P 500, are usually considered safe as they grow in value over time. On the other hand, leveraged ETFs aim to increase returns but come with higher risk due to their increased volatility.\n\nShow More Show Less\n\nTrusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.\n\nYou can use the Bajaj Finserv App to:\n\n- Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.\n- Invest in fixed deposits and mutual funds on the app.\n- Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.\n- Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.\n- Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.\n- Shop from over 100+ brand partners that offer a diverse range of products and services.\n- Use specialised tools like EMI calculators, SIP Calculators\n- Check your credit score, download loan statements and even get quick customer support—all on the app.\n\nDownload the Bajaj Finserv App today and experience the convenience of managing your finances on one app.\n\nBajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.\n\nThe information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.\n\nThis information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.\n\nDisclaimer:\n\nBajaj Finance Limited (\"BFL\") is registered with the Association of Mutual Funds in India (\"AMFI\") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319\n\nBFL does NOT:\n\n(i) provide investment advisory services in any manner or form:\n\n(ii) carry customized\/personalized suitability assessment:\n\n(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.\n\nIn addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme\/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price\/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other\/better alternatives to the investment avenues displayed by BFL. 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Boilerpipe Text	Home Investments Mutual Funds What is an ETF 324 3 mins 13-January-2026 ETF's full form is an exchange-traded fund. It is a type of security that mirrors the performance of an index, commodity, bonds, or collection of assets, much like an index fund. In simple words, ETFs are funds that track various indexes, such as the CNX Nifty or the BSE Sensex, among others. In recent years, India's financial markets have witnessed substantial growth and innovation, providing investors with an array of investment options. Among these, Exchange-Traded Funds (ETFs) have emerged as a popular and accessible mutual fund investment option, gaining significant traction among Indian investors. ETFs have brought a new dimension to the Indian investment landscape, offering benefits that align well with the preferences and requirements of Indian investors. In this article, we will learn about the ETF meaning, how ETF work, and know about the different types of ETFs available. Also, we will check their advantages and associated risks and learn some key factors to consider before investing in ETFs. What Is an Exchange-Traded Fund (ETF)? An Exchange-Traded Fund (ETF) is a marketable financial product traded on stock exchanges, much like individual stocks. The term ETF reflects its nature as an investment fund that holds a diverse portfolio of assets. Unlike a single stock representing one company, an ETF consists of a collection of securities. These may include stocks, bonds, commodities, or other instruments, providing investors with a convenient way to achieve diversification. ETFs are designed to track the performance of specific indices, such as the CNX Nifty or the BSE Sensex, making them an efficient way for investors to gain exposure to broader market movements. One of the primary advantages of ETFs is their liquidity; investors can buy and sell shares throughout the trading day at market prices. Additionally, ETFs typically have lower expense ratios compared to mutual funds , making them an attractive option for cost-conscious investors. With their diverse range of offerings and easy accessibility, ETFs have become increasingly popular in recent years, appealing to both novice and seasoned investors seeking to diversify their portfolios. Let's explain the process of creating and redeeming ETF units using an example of a commodity, like gold: Imagine there's an ETF that tracks the performance of gold prices. To make this ETF work, a special player called the "authorized participant" (AP) comes into the picture. APs are usually big financial institutions or market makers. Here's how it works: Creating ETF Units : When there is demand for more shares of the gold ETF , the AP steps in. They acquire the actual gold, just like physical gold bars or gold certificates, that will represent the value of t’e ETF's shares. They then deliver this gold to the ETF's manager/ AMC, who takes care of the ETF's assets. In return for delivering the gold, the ETF's manager/ AMC creates new units of the ETF. These new units are then transferred to the AP. So, the AP now has units in the ETF that represent a portion of the total gold held by the ETF. Redeeming ETF Units: Now, let's say an investor wants to sell their units of the gold ETF. The AP buys those ETF units from the investor. When the investor sells their ETF units, the AP takes those units and redeems them back to the ETF's manager/ AMC. In exchange, the ETF's manager gives the AP the corresponding amount of actual gold, just like the gold bars or certificates or cash that the ETF is holding. Why invest in ETFs? Investing in Exchange-Traded Funds (ETFs) offers numerous advantages, making them an attractive option for various investors. ETFs provide instant diversification by holding a basket of securities, reducing risk compared to investing in individual assets. They are cost-effective due to their low expense ratios and typically lower management fees. ETFs also offer flexibility, as they can be traded like stocks throughout market hours, providing liquidity and ease of access. Additionally, they cater to various investment goals, with options ranging from equity and bonds to sector-specific and international markets. Their transparency ensures that investors know the underlying holdings, enabling informed decisions. Reason Description Diversification ETFs hold a mix of securities, spreading risk across different investments. Cost-effective Low expense ratios and minimal management fees compared to mutual funds. Liquidity and flexibility Traded like stocks, ETFs allow buying and selling during market hours. Variety of options Offers access to equities, bonds, sectors, and international markets. Transparency Holdings are disclosed regularly for investor awareness. Keeping the ETF's Market Price in Line: The process of creating and redeeming ETF units is essential for making sure the price of the ETF on the stock exchange stays very close to the actual value of the gold it holds. The Buy and Sell price of ETFs should lie in the close range of its real-time NAV for maintaining product efficiency. In summary, the creation and redemption mechanism with the help of authorized participants (APs) ensures that the price of the gold ETF on the stock exchange closely reflects the true value of the gold it holds. This way, investors can buy or sell shares of the gold ETF at a price that is fair and transparent, based on the actual value of the underlying commodity - gold. Types of ETFs in India Indian investors can choose from a diverse range of ETFs to suit their investment objectives and risk appetites. Some of the common types of ETFs available in the Indian market include: Index ETFs: These ETFs aim to replicate the performance of a specific stock market index, such as the Nifty 50 or the Sensex. They provide investors with exposure to a broad market segment or a specific sector/ Smart-Beta Strategy. Gold/ Silver ETFs: Gold/ Silver ETFs allow investors to invest in the price movements of gold/ silver without physically owning the precious metal. Sectoral ETFs: Sector-specific ETFs enable investors to focus on particular industries or sectors, like banking, technology, or energy, etc. Bond ETFs: Bond ETFs invest in benchmark indices of fixed-income securities, including government bonds and corporate bonds, catering to investors seeking income and stability International ETFs: These ETFs provide investors with exposure to international markets and assets via international Indices (viz. S&P 500, Nasdaq 100, etc) allowing them to diversify globally. Smart Beta ETFs: These ETFs utilize alternative index construction methodologies, focusing on factors like low volatility, high dividend yield, quality, momentum, Alpha, etc rather than traditional market capitalization-based indices. Commodity ETFs: These ETFs track the price movements of commodities like oil or precious metals. Passive ETFs: Passive ETFs aim to replicate the performance of a specific market index. In India, these funds commonly track indices such as the Nifty 50, Sensex, or sectoral indices. Since they simply mirror the index composition, passive ETFs generally have lower expense ratios and are widely used by investors seeking cost-efficient market exposure. Actively Managed ETFs: Unlike passive ETFs, actively managed ETFs do not track a specific index. Instead, professional fund managers actively select and manage securities in the portfolio based on market opportunities and research. While these ETFs offer the potential to outperform benchmarks, they typically have higher management costs compared to passive ETFs. Bitcoin / Crypto ETFs: Spot Bitcoin ETFs were approved by the U.S. Securities and Exchange Commission (SEC) in 2024, allowing investors in the U.S. to gain exposure to Bitcoin through traditional brokerage accounts. However, in India, cryptocurrency ETFs are not currently approved or listed on Indian exchanges, and investors cannot access such products through domestic ETF platforms. Leveraged ETFs: Leveraged ETFs aim to generate multiples of the returns of an underlying index, such as 2× or 3× the daily movement. These funds use derivatives and borrowed capital to amplify returns. However, leveraged ETFs are not widely available in the Indian ETF market, and Indian regulators generally take a cautious approach toward such high-risk products. Advantages of ETFs for Indian Investors Affordability: ETFs offer a cost-effective investment solution with relatively lower expense ratios , making them an attractive choice for cost-conscious Indian investors. Diversification: ETFs provide diversification by investing in a basket of securities, reducing exposure to individual stock risks. Liquidity: Being listed on stock exchanges, ETFs offer intraday liquidity, allowing investors to buy or sell units at prevailing market prices throughout the trading day. Taxation: Taxation for ETFs depend on the underlying stock. Index and sectoral ETFs are regarded as equity-oriented ETFs when it comes to tax. As a result, short-term capital gains on ETF units retained for less than a year are taxed at a rate of 15%. Long-term capital gains on units maintained for over a year are levied at a rate of 10%, without the benefit of indexation. Long-term capital gains up to Rs. 1 lakh are exempt from tax. Gold ETFs and international ETFs are treated as non-equity funds for taxation purposes. if ETF units are held for less than 36 months, any short-term gains are taxed according to the relevant income tax bracket. Long-term capital gains from units held longer than a year are subject to a 20% tax, considering the indexation benefit. A note to be included wherever tax rates are mentioned. The note to state that the tax rates mentioned above are excluding surcharge if any and cess. Transparency: ETFs regularly disclose their portfolios, NAVs enabling investors to make informed decisions about their investments. Exchange-Traded Funds (ETFs): Understanding Risks Exchange-Traded Funds (ETFs), like any other investment assets, come with inherent risks that investors need to be aware of before making investment decisions. Understanding these risks is essential to manage investments prudently and align them with individual financial goals and risk tolerance. Let's delve into some of the key risks associated with ETF investments in the Indian context: Market Risk: ETFs are subject to market risk , which refers to the potential losses stemming from overall market movements. If the market experiences a downturn, the value of the underlying assets in the ETF's portfolio can decrease, leading to a decline in the ETF's net asset value ( NAV ) and market price. Tracking Error: While ETFs aim to replicate the performance of a specific index or asset, there might be a slight disparity between the ETF's returns and the index it tracks. This difference is known as tracking error and can be influenced by factors such as transaction costs, management fees, and imperfect replication of the index. Liquidity Risk: Although ETFs are traded on stock exchanges, the liquidity of certain ETFs may vary. In times of market stress or if the underlying assets are illiquid, it may become challenging to buy or sell ETF units at the desired price, potentially resulting in higher bid-ask spreads. Concentration Risk: Some ETFs are concentrated in specific sectors, industries, or asset classes . If the particular sector or industry faces challenges or a significant event affects the asset class, the ETF's performance could be adversely impacted. Currency Risk: For ETFs with international exposure, fluctuations in currency exchange rates can affect the returns for Indian investors. Currency risk arises when the investment is denominated in foreign currency, and changes in exchange rates can either enhance or erode investment gains. Counterparty Risk: Some ETFs use financial derivatives or engage in securities lending to enhance returns. This introduces counterparty risk, which is the risk that the entity on the other side of the transaction might default or fail to fulfil its obligations. Inherent Risk of Underlying Assets: ETFs invest in a diversified basket of assets, but the risk associated with the underlying assets remains. For instance, equity ETFs may be exposed to risks associated with the individual stocks in the portfolio, while bond ETFs may face interest rate risk and credit risk . Regulatory and Taxation Risks: Changes in government regulations or tax laws can impact the returns and taxation of ETF investments, potentially affecting the attractiveness of certain ETFs. Pros and Cons of ETFs Pros Diversified market exposure: ETFs allow investors to gain exposure to multiple companies across sectors through indices such as Nifty 50, Sensex, or sectoral indices. Lower costs: Most ETFs in India have relatively low expense ratios compared to actively managed mutual funds. Brokerage charges are also generally minimal. Diversification benefits: By tracking a basket of securities, ETFs help reduce the risk associated with investing in a single stock. Targeted investment options: Investors can choose ETFs focused on specific sectors, themes, commodities like gold, or broader market indices. Cons Higher costs for active ETFs: Actively managed ETFs may have higher expense ratios compared to passive index-tracking ETFs. Limited diversification in sector ETFs: ETFs focused on a single sector or theme may increase concentration risk. Liquidity concerns: Some ETFs listed on Indian exchanges may have lower trading volumes, which can affect ease of buying or selling units at desired prices. How is an ETF different from an index fund? An ETF (exchange-traded fund) differs from an index fund primarily in trading mechanisms and pricing. ETFs trade on stock exchanges like individual stocks, allowing for intraday buying and selling at fluctuating market prices. In contrast, index funds are bought and sold at the end of the trading day at the net asset value (NAV). Additionally, ETFs often have lower expense ratios and can be more tax-efficient due to their unique structure, whereas index funds may have minimum investment requirements. Both aim to replicate the performance of a specific index, but their trading flexibility and cost structures vary significantly. How do ETFs and mutual funds compare? ETFs and mutual funds are both investment vehicles offering diversification, but they differ in structure, trading, and costs. ETFs trade on stock exchanges like individual stocks, allowing investors to buy and sell throughout market hours. In contrast, mutual funds are bought or redeemed at the day's Net Asset Value (NAV). ETFs typically have lower expense ratios due to their passive management approach, while mutual funds may have higher costs from active management. ETFs are more tax-efficient, as their structure minimises capital gains distributions. Mutual funds often require a minimum investment, but ETFs can be purchased in single units. While ETFs offer real-time pricing, mutual funds provide convenience through systematic investment plans (SIPs). Choosing between the two depends on an investor’s preferences for trading flexibility, cost structure, and investment strategy, with ETFs suiting short-term or cost-conscious investors and mutual funds appealing to those seeking long-term active management. Do ETFs provide diversity? Yes, ETFs provide diversity by offering exposure to a wide range of assets within a single investment. Each ETF typically holds a basket of securities, which may include stocks, bonds, commodities, or real estate, reflecting various sectors or market indices. This diversification reduces individual investment risk , as poor performance in one security can be balanced by gains in others. Additionally, investors can access niche markets or specific themes through targeted ETFs, enhancing their portfolio's breadth. Overall, ETFs serve as an effective tool for investors seeking to achieve a diversified investment strategy while maintaining liquidity and flexibility. How much do ETFs cost? ETFs are generally considered a cost-efficient investment option. The primary cost involved is the expense ratio, which covers fund management, administration, and operational expenses. For most equity ETFs, this expense ratio is relatively low compared to other investment products. In addition to this, investors may incur brokerage charges when buying or selling ETF units on the stock exchange. Some platforms may also apply small transaction or demat-related charges. Since ETFs are passively managed in most cases, their overall costs tend to remain lower, helping investors retain a larger share of their returns over the long term. ETF creation and redemption ETF creation and redemption is a process handled by authorised participants, usually large institutional investors. When demand for an ETF increases, authorised participants create new ETF units by delivering a basket of underlying securities to the fund house. In return, they receive ETF units, which are then sold on the stock exchange. Conversely, when supply exceeds demand, ETF units are redeemed by returning them to the fund house in exchange for the underlying securities. This mechanism helps keep the ETF’s market price close to its net asset value and ensures liquidity in the market. How to find the right ETFs for your portfolio Choosing the right ETFs starts with understanding your investment goals, time horizon, and risk tolerance. Investors should first identify whether they want exposure to equities, debt, commodities, or international markets. Evaluating the ETF’s underlying index is equally important, as it determines performance and risk characteristics. Expense ratios should be compared, as lower costs can improve long-term returns. Liquidity is another key factor, so checking average trading volumes and bid-ask spreads is useful. Investors should also review the fund size and tracking error to assess efficiency. Aligning ETF selection with overall asset allocation helps create a balanced and goal-oriented portfolio. ETFs vs mutual funds vs stocks When compared with other investment options, exchange-traded funds offer several distinct advantages. Lower costs, broad diversification, and flexibility are some of the reasons ETFs are widely preferred. Below is a comparison highlighting key differences between ETFs, mutual funds, and individual stocks. Aspect Exchange-traded funds (ETFs) Mutual funds Individual stocks Fees Average equity ETF expense ratio is around 0.15% Average equity mutual fund expense ratio is about 0.42%, along with possible additional charges Brokerage or commission fees, often zero but may go up to $5 How to buy Bought and sold during regular and extended market hours Transactions are processed after market close at the day’s NAV Bought and sold during regular and extended market hours Factors to Consider Before Investing in ETFs Investment Objective: Determine your investment goals, whether it's capital appreciation, income generation, or diversification. Choose an ETF that aligns with your objectives. Asset Class and Sector: ETFs cover various asset classes and sectors. Assess your risk tolerance and preference for sectors like technology, healthcare, or commodities before investing. Expense Ratio: Evaluate the ETF's expense ratio, as lower fees can impact your overall returns. Look for cost-efficient options without compromising quality. Liquidity: Ensure the ETF has sufficient trading volume and liquidity to buy and sell shares without significant price fluctuations. Historical Performance: Examine the ETF's historical performance and its ability to track its underlying index accurately. Past performance isn't indicative of future results, but it provides insights into the ETF's tracking ability. Key takeaways Trading mechanisms : ETFs differ from index funds in their trading structure; ETFs trade on stock exchanges like individual stocks, allowing intraday transactions at fluctuating prices, while index funds are traded at the end of the day at their net asset value (NAV). Diversity in investment : ETFs offer significant diversity by holding a collection of various securities, such as stocks, bonds, or commodities, which helps to mitigate individual investment risk and provides broader market exposure. Cost efficiency : Generally, ETFs have lower expense ratios compared to index funds, making them a cost-effective option for investors seeking diversification and flexibility in their portfolios. Conclusion While ETFs offer several advantages, it is crucial to recognize and manage the inherent risks associated with these investment vehicles. By adopting a well-informed and balanced approach, investors can leverage the benefits of ETFs while navigating potential risks effectively. Consulting with a financial advisor and conducting thorough due diligence are essential steps to make informed investment decisions and align ETF investments with individual financial goals and risk tolerance. Discover a wide selection of ETFs with comprehensive analysis for informed investing on the Bajaj Finserv platform. ETFs provide diversification by investing in various stocks or bonds, effectively reducing overall portfolio risk. Moreover, they are easily accessible, allowing you to buy and sell throughout the trading day. Start your ETF investment journey with us today! Essential tools for mutual fund investors Mutual Fund Calculator Lumpsum Calculator Step Up SIP Calculator Systematic Investment Plan Calculator SBI SIP Calculator HDFC SIP Calculator Axis Bank SIP Calculator ICICI SIP Calculator Nippon India SIP Calculator ABSL SIP Calculator Groww SIP Calculator LIC SIP Calculator Frequently Asked Questions Exchange-Traded Funds (ETFs) are like baskets of assets, such as stocks, bonds, or commodities, that are traded on stock exchanges, providing investors with diversified exposure to these assets. The "best" ETF depends on your investment goals. Choose based on your objectives and risk tolerance. Yes, you can sell ETF shares anytime during market hours when the stock exchange is open. ETFs offer intraday liquidity, so you can trade them throughout the trading session. An ETF, or exchange-traded fund, is marketable security. It is an investment that trades like a stock but represents a collection of assets, such as stocks, bonds, or commodities. The primary goal of an ETF is to match the performance of a specific index, like CNX Nifty or BSE Sensex. When you buy an ETF, you are investing in a portfolio that reflects the performance of that index. ETFs can be a safe investment option if used wisely. They provide the benefits of diversification and flexibility. Indexed ETFs, which follow indexes like the S&P 500, are usually considered safe as they grow in value over time. On the other hand, leveraged ETFs aim to increase returns but come with higher risk due to their increased volatility. Show More Show Less Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals. You can use the Bajaj Finserv App to: Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more. Invest in fixed deposits and mutual funds on the app. Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers. Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions. Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs. Shop from over 100+ brand partners that offer a diverse range of products and services. 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[Mutual Funds](https://www.bajajfinserv.in/investments/mutual-funds "Mutual Funds") 4. What is an ETF # What is ETF An exchange-traded fund (ETF) is a collection of investments that allows investors to pool money to buy stocks, bonds, or other assets. ETFs are traded like shares on stock exchanges and are made up of a collection of assets, such as shares, bonds, or commodities. ETFs are registered with the SEC and can be traded on a national securities exchange throughout the day. [INVEST NOW](https://www.bajajfinserv.in/mutual-funds/login?sourcing_channel=BFL&utm_source=MF&utm_medium=ADP&utm_campaign=income-tax-slabs#adp "INVEST NOW") What Is ETF and how does it work [INVEST NOW](https://www.bajajfinserv.in/mutual-funds/login?sourcing_channel=BFL&utm_source=MF&utm_medium=ADP&utm_campaign=income-tax-slabs#adp "INVEST NOW") 324 3 mins 13-January-2026 ETF's full form is an exchange-traded fund. It is a type of security that mirrors the performance of an index, commodity, bonds, or collection of assets, much like an index fund. In simple words, ETFs are funds that track various indexes, such as the CNX Nifty or the BSE Sensex, among others. In recent years, India's financial markets have witnessed substantial growth and innovation, providing investors with an array of investment options. Among these, Exchange-Traded Funds (ETFs) have emerged as a popular and accessible mutual fund investment option, gaining significant traction among Indian investors. ETFs have brought a new dimension to the Indian investment landscape, offering benefits that align well with the preferences and requirements of Indian investors. In this article, we will learn about the ETF meaning, how ETF work, and know about the different types of ETFs available. Also, we will check their advantages and associated risks and learn some key factors to consider before investing in ETFs. ## What Is an Exchange-Traded Fund (ETF)? An Exchange-Traded Fund (ETF) is a marketable financial product traded on stock exchanges, much like individual stocks. The term ETF reflects its nature as an investment fund that holds a diverse portfolio of assets. Unlike a single stock representing one company, an ETF consists of a collection of securities. These may include stocks, bonds, commodities, or other instruments, providing investors with a convenient way to achieve diversification. ETFs are designed to track the performance of specific indices, such as the CNX Nifty or the BSE Sensex, making them an efficient way for investors to gain exposure to broader market movements. One of the primary advantages of ETFs is their liquidity; investors can buy and sell shares throughout the trading day at market prices. Additionally, ETFs typically have lower expense ratios compared to [mutual funds](https://www.bajajfinserv.in/investments/mutual-funds), making them an attractive option for cost-conscious investors. With their diverse range of offerings and easy accessibility, ETFs have become increasingly popular in recent years, appealing to both novice and seasoned investors seeking to diversify their portfolios. ## How ETFs Work? Let's explain the process of creating and redeeming ETF units using an example of a commodity, like gold: Imagine there's an ETF that tracks the performance of gold prices. To make this ETF work, a special player called the "authorized participant" (AP) comes into the picture. APs are usually big financial institutions or market makers. ## Here's how it works: 1. Creating ETF Units: When there is demand for more shares of the [gold ETF](https://www.bajajfinserv.in/investments/gold-etf), the AP steps in. They acquire the actual gold, just like physical gold bars or gold certificates, that will represent the value of t’e ETF's shares. They then deliver this gold to the ETF's manager/ AMC, who takes care of the ETF's assets. In return for delivering the gold, the ETF's manager/ [AMC](https://www.bajajfinserv.in/investments/unravelling-the-role-of-asset-management-companies) creates new units of the ETF. These new units are then transferred to the AP. So, the AP now has units in the ETF that represent a portion of the total gold held by the ETF. 2. Redeeming ETF Units: Now, let's say an investor wants to sell their units of the gold ETF. The AP buys those ETF units from the investor. When the investor sells their ETF units, the AP takes those units and redeems them back to the ETF's manager/ AMC. In exchange, the ETF's manager gives the AP the corresponding amount of actual gold, just like the gold bars or certificates or cash that the ETF is holding. ## Why invest in ETFs? Investing in Exchange-Traded Funds (ETFs) offers numerous advantages, making them an attractive option for various investors. ETFs provide instant diversification by holding a basket of securities, reducing risk compared to investing in individual assets. They are cost-effective due to their low expense ratios and typically lower management fees. ETFs also offer flexibility, as they can be traded like stocks throughout market hours, providing liquidity and ease of access. Additionally, they cater to various investment goals, with options ranging from equity and bonds to sector-specific and international markets. Their transparency ensures that investors know the underlying holdings, enabling informed decisions. \| \| \| \|---\|---\| \| Reason \| Description \| \| Diversification \| ETFs hold a mix of securities, spreading risk across different investments. \| \| Cost-effective \| Low expense ratios and minimal management fees compared to mutual funds. \| \| Liquidity and flexibility \| Traded like stocks, ETFs allow buying and selling during market hours. \| \| Variety of options \| Offers access to equities, bonds, sectors, and international markets. \| \| Transparency \| Holdings are disclosed regularly for investor awareness. \| ## Keeping the ETF's Market Price in Line: The process of creating and redeeming ETF units is essential for making sure the price of the ETF on the stock exchange stays very close to the actual value of the gold it holds. The Buy and Sell price of ETFs should lie in the close range of its real-time [NAV](https://www.bajajfinserv.in/investments/nav-explained) for maintaining product efficiency. In summary, the creation and redemption mechanism with the help of authorized participants (APs) ensures that the price of the gold ETF on the stock exchange closely reflects the true value of the gold it holds. This way, investors can buy or sell shares of the gold ETF at a price that is fair and transparent, based on the actual value of the underlying commodity - gold. ## ## Types of ETFs in India Indian investors can choose from a diverse range of ETFs to suit their investment objectives and risk appetites. Some of the common types of ETFs available in the Indian market include: 1. Index ETFs: These ETFs aim to replicate the performance of a specific stock market index, such as the Nifty 50 or the Sensex. They provide investors with exposure to a broad market segment or a specific sector/ Smart-Beta Strategy. 2. Gold/ Silver ETFs: Gold/ Silver ETFs allow investors to invest in the price movements of gold/ silver without physically owning the precious metal. 3. Sectoral ETFs: Sector-specific ETFs enable investors to focus on particular industries or sectors, like banking, technology, or energy, etc. 4. Bond ETFs: Bond ETFs invest in benchmark indices of fixed-income securities, including government bonds and corporate bonds, catering to investors seeking income and stability 5. International ETFs: These ETFs provide investors with exposure to international markets and assets via international Indices (viz. S\&P 500, Nasdaq 100, etc) allowing them to diversify globally. 6. Smart Beta ETFs: These ETFs utilize alternative index construction methodologies, focusing on factors like low volatility, high dividend yield, quality, momentum, Alpha, etc rather than traditional market capitalization-based indices. 7. Commodity ETFs: These ETFs track the price movements of commodities like oil or precious metals. 8. Passive ETFs: Passive ETFs aim to replicate the performance of a specific market index. In India, these funds commonly track indices such as the Nifty 50, Sensex, or sectoral indices. Since they simply mirror the index composition, passive ETFs generally have lower expense ratios and are widely used by investors seeking cost-efficient market exposure. 9. Actively Managed ETFs: Unlike passive ETFs, actively managed ETFs do not track a specific index. Instead, professional fund managers actively select and manage securities in the portfolio based on market opportunities and research. While these ETFs offer the potential to outperform benchmarks, they typically have higher management costs compared to passive ETFs. 10. Bitcoin / Crypto ETFs: Spot Bitcoin ETFs were approved by the U.S. Securities and Exchange Commission (SEC) in 2024, allowing investors in the U.S. to gain exposure to Bitcoin through traditional brokerage accounts. However, in India, cryptocurrency ETFs are not currently approved or listed on Indian exchanges, and investors cannot access such products through domestic ETF platforms. 11. Leveraged ETFs: Leveraged ETFs aim to generate multiples of the returns of an underlying index, such as 2× or 3× the daily movement. These funds use derivatives and borrowed capital to amplify returns. However, leveraged ETFs are not widely available in the Indian ETF market, and Indian regulators generally take a cautious approach toward such high-risk products. ## ## Advantages of ETFs for Indian Investors 1. Affordability: ETFs offer a cost-effective investment solution with relatively lower [expense ratios](https://www.bajajfinserv.in/investments/what-is-expense-ratio), making them an attractive choice for cost-conscious Indian investors. 2. Diversification: ETFs provide diversification by investing in a basket of securities, reducing exposure to individual stock risks. 3. Liquidity: Being listed on stock exchanges, ETFs offer intraday liquidity, allowing investors to buy or sell units at prevailing market prices throughout the trading day. 4. Taxation: Taxation for ETFs depend on the underlying stock. Index and sectoral ETFs are regarded as equity-oriented ETFs when it comes to tax. As a result, [short-term capital gains](https://www.bajajfinserv.in/investments/understanding-short-term-capital-gains-tax) on ETF units retained for less than a year are taxed at a rate of 15%. Long-term capital gains on units maintained for over a year are levied at a rate of 10%, without the benefit of indexation. Long-term capital gains up to Rs. 1 lakh are exempt from tax. Gold ETFs and international ETFs are treated as non-equity funds for taxation purposes. if ETF units are held for less than 36 months, any short-term gains are taxed according to the relevant income tax bracket. [Long-term capital gains](https://www.bajajfinserv.in/investments/understanding-long-term-capital-gains-tax) from units held longer than a year are subject to a 20% tax, considering the indexation benefit. A note to be included wherever tax rates are mentioned. The note to state that the tax rates mentioned above are excluding surcharge if any and cess. 5. Transparency: ETFs regularly disclose their portfolios, NAVs enabling investors to make informed decisions about their investments. ## Exchange-Traded Funds (ETFs): Understanding Risks Exchange-Traded Funds (ETFs), like any other investment assets, come with [inherent risks](https://www.bajajfinserv.in/investments/what-is-inherent-risk) that investors need to be aware of before making investment decisions. Understanding these risks is essential to manage investments prudently and align them with individual financial goals and risk tolerance. Let's delve into some of the key risks associated with ETF investments in the Indian context: 1. Market Risk: ETFs are subject to [market risk](https://www.bajajfinserv.in/investments/what-is-market-risk), which refers to the potential losses stemming from overall market movements. If the market experiences a downturn, the value of the underlying assets in the ETF's portfolio can decrease, leading to a decline in the ETF's net asset value ([NAV](https://www.bajajfinserv.in/investments/nav-explained)) and market price. 2. Tracking Error: While ETFs aim to replicate the performance of a specific index or asset, there might be a slight disparity between the ETF's returns and the index it tracks. This difference is known as tracking error and can be influenced by factors such as transaction costs, management fees, and imperfect replication of the index. 3. Liquidity Risk: Although ETFs are traded on stock exchanges, the [liquidity](https://www.bajajfinserv.in/investments/liquidity-risk) of certain ETFs may vary. In times of market stress or if the underlying assets are illiquid, it may become challenging to buy or sell ETF units at the desired price, potentially resulting in higher bid-ask spreads. 4. Concentration Risk: Some ETFs are concentrated in specific sectors, industries, or [asset classes](https://www.bajajfinserv.in/investments/understanding-mutual-fund-asset-classes). If the particular sector or industry faces challenges or a significant event affects the asset class, the ETF's performance could be adversely impacted. 5. Currency Risk: For ETFs with international exposure, fluctuations in currency exchange rates can affect the returns for Indian investors. Currency risk arises when the investment is denominated in foreign currency, and changes in exchange rates can either enhance or erode investment gains. 6. Counterparty Risk: Some ETFs use financial derivatives or engage in securities lending to enhance returns. This introduces counterparty risk, which is the risk that the entity on the other side of the transaction might default or fail to fulfil its obligations. 7. Inherent Risk of Underlying Assets: ETFs invest in a diversified basket of assets, but the risk associated with the underlying assets remains. For instance, equity ETFs may be exposed to risks associated with the individual stocks in the portfolio, while bond ETFs may face interest rate risk and [credit risk](https://www.bajajfinserv.in/investments/credit-risk). 8. Regulatory and Taxation Risks: Changes in government regulations or tax laws can impact the returns and taxation of ETF investments, potentially affecting the attractiveness of certain ETFs. ## Pros and Cons of ETFs Pros - Diversified market exposure: ETFs allow investors to gain exposure to multiple companies across sectors through indices such as Nifty 50, Sensex, or sectoral indices. - Lower costs: Most ETFs in India have relatively low expense ratios compared to actively managed mutual funds. Brokerage charges are also generally minimal. - Diversification benefits: By tracking a basket of securities, ETFs help reduce the risk associated with investing in a single stock. - Targeted investment options: Investors can choose ETFs focused on specific sectors, themes, commodities like gold, or broader market indices. Cons - Higher costs for active ETFs: Actively managed ETFs may have higher expense ratios compared to passive index-tracking ETFs. - Limited diversification in sector ETFs: ETFs focused on a single sector or theme may increase concentration risk. - Liquidity concerns: Some ETFs listed on Indian exchanges may have lower trading volumes, which can affect ease of buying or selling units at desired prices. ## ## How is an ETF different from an index fund? An ETF (exchange-traded fund) differs from an index fund primarily in trading mechanisms and pricing. ETFs trade on stock exchanges like individual stocks, allowing for intraday buying and selling at fluctuating market prices. In contrast, index funds are bought and sold at the end of the trading day at the net asset value (NAV). Additionally, ETFs often have lower expense ratios and can be more tax-efficient due to their unique structure, whereas index funds may have minimum investment requirements. Both aim to replicate the performance of a specific index, but their trading flexibility and cost structures vary significantly. ## How do ETFs and mutual funds compare? ETFs and mutual funds are both investment vehicles offering diversification, but they differ in structure, trading, and costs. ETFs trade on stock exchanges like individual stocks, allowing investors to buy and sell throughout market hours. In contrast, mutual funds are bought or redeemed at the day's Net Asset Value (NAV). ETFs typically have lower expense ratios due to their passive management approach, while mutual funds may have higher costs from active management. ETFs are more tax-efficient, as their structure minimises capital gains distributions. Mutual funds often require a minimum investment, but ETFs can be purchased in single units. While ETFs offer real-time pricing, mutual funds provide convenience through [systematic investment plans](https://www.bajajfinserv.in/investments/what-is-sip) (SIPs). Choosing between the two depends on an investor’s preferences for trading flexibility, cost structure, and investment strategy, with ETFs suiting short-term or cost-conscious investors and mutual funds appealing to those seeking long-term active management. ## Do ETFs provide diversity? Yes, ETFs provide diversity by offering exposure to a wide range of assets within a single investment. Each ETF typically holds a basket of securities, which may include stocks, bonds, commodities, or real estate, reflecting various sectors or market indices. This diversification reduces individual [investment risk](https://www.bajajfinserv.in/investments/investment-risk), as poor performance in one security can be balanced by gains in others. Additionally, investors can access niche markets or specific themes through targeted ETFs, enhancing their portfolio's breadth. Overall, ETFs serve as an effective tool for investors seeking to achieve a diversified investment strategy while maintaining liquidity and flexibility. ## How much do ETFs cost? ETFs are generally considered a cost-efficient investment option. The primary cost involved is the expense ratio, which covers fund management, administration, and operational expenses. For most equity ETFs, this expense ratio is relatively low compared to other investment products. In addition to this, investors may incur brokerage charges when buying or selling ETF units on the stock exchange. Some platforms may also apply small transaction or demat-related charges. Since ETFs are passively managed in most cases, their overall costs tend to remain lower, helping investors retain a larger share of their returns over the long term. ## ETF creation and redemption ETF creation and redemption is a process handled by authorised participants, usually large institutional investors. When demand for an ETF increases, authorised participants create new ETF units by delivering a basket of underlying securities to the fund house. In return, they receive ETF units, which are then sold on the stock exchange. Conversely, when supply exceeds demand, ETF units are redeemed by returning them to the fund house in exchange for the underlying securities. This mechanism helps keep the ETF’s market price close to its net asset value and ensures liquidity in the market. ## How to find the right ETFs for your portfolio Choosing the right ETFs starts with understanding your investment goals, time horizon, and risk tolerance. Investors should first identify whether they want exposure to equities, debt, commodities, or international markets. Evaluating the ETF’s underlying index is equally important, as it determines performance and risk characteristics. Expense ratios should be compared, as lower costs can improve long-term returns. Liquidity is another key factor, so checking average trading volumes and bid-ask spreads is useful. Investors should also review the fund size and tracking error to assess efficiency. Aligning ETF selection with overall asset allocation helps create a balanced and goal-oriented portfolio. ## ETFs vs mutual funds vs stocks When compared with other investment options, exchange-traded funds offer several distinct advantages. Lower costs, broad diversification, and flexibility are some of the reasons ETFs are widely preferred. Below is a comparison highlighting key differences between ETFs, mutual funds, and individual stocks. \| \| \| \| \| \|---\|---\|---\|---\| \| Aspect \| Exchange-traded funds (ETFs) \| Mutual funds \| Individual stocks \| \| Fees \| Average equity ETF expense ratio is around 0.15% \| Average equity mutual fund expense ratio is about 0.42%, along with possible additional charges \| Brokerage or commission fees, often zero but may go up to \$5 \| \| How to buy \| Bought and sold during regular and extended market hours \| Transactions are processed after market close at the day’s NAV \| Bought and sold during regular and extended market hours \| ## Factors to Consider Before Investing in ETFs 1. Investment Objective: Determine your investment goals, whether it's capital appreciation, income generation, or diversification. Choose an ETF that aligns with your objectives. 2. Asset Class and Sector: ETFs cover various asset classes and sectors. Assess your [risk tolerance](https://www.bajajfinserv.in/investments/what-is-risk-tolerance) and preference for sectors like technology, healthcare, or commodities before investing. 3. Expense Ratio: Evaluate the ETF's expense ratio, as lower fees can impact your overall returns. Look for cost-efficient options without compromising quality. 4. Liquidity: Ensure the ETF has sufficient trading volume and liquidity to buy and sell shares without significant price fluctuations. 5. Historical Performance: Examine the ETF's historical performance and its ability to track its underlying index accurately. Past performance isn't indicative of future results, but it provides insights into the ETF's tracking ability. ## Key takeaways - Trading mechanisms: ETFs differ from index funds in their trading structure; ETFs trade on stock exchanges like individual stocks, allowing intraday transactions at fluctuating prices, while index funds are traded at the end of the day at their net asset value (NAV). - Diversity in investment: ETFs offer significant diversity by holding a collection of various securities, such as stocks, bonds, or commodities, which helps to mitigate individual investment risk and provides broader market exposure. - Cost efficiency: Generally, ETFs have lower expense ratios compared to index funds, making them a cost-effective option for investors seeking diversification and flexibility in their portfolios. ## Conclusion While ETFs offer several advantages, it is crucial to recognize and manage the inherent risks associated with these investment vehicles. By adopting a well-informed and balanced approach, investors can leverage the [benefits of ETFs](https://www.bajajfinserv.in/investments/advantages-of-etfs) while navigating potential risks effectively. Consulting with a financial advisor and conducting thorough due diligence are essential steps to make informed investment decisions and align ETF investments with individual financial goals and risk tolerance. Discover a wide selection of ETFs with comprehensive analysis for informed investing on the Bajaj Finserv platform. ETFs provide diversification by investing in various stocks or bonds, effectively reducing overall portfolio risk. Moreover, they are easily accessible, allowing you to buy and sell throughout the trading day. Start your ETF investment journey with us today\! ## Essential tools for mutual fund investors \| \| \| \| \| \|---\|---\|---\|---\| \| [Mutual Fund Calculator](https://www.bajajfinserv.in/investments/mutual-fund-calculator) \| [Lumpsum Calculator](https://www.bajajfinserv.in/investments/lumpsum-calculator) \| [Step Up SIP Calculator](https://www.bajajfinserv.in/investments/step-up-sip-calculator) \| [Systematic Investment Plan Calculator](https://www.bajajfinserv.in/investments/sip-calculator) \| \| [SBI SIP Calculator](https://www.bajajfinserv.in/investments/sbi-sip-calculator) \| [HDFC SIP Calculator](https://www.bajajfinserv.in/investments/hdfc-sip-calculator) \| [Axis Bank SIP Calculator](https://www.bajajfinserv.in/investments/axis-bank-sip-calculator) \| [ICICI SIP Calculator](https://www.bajajfinserv.in/investments/icici-sip-calculator) \| \| [Nippon India SIP Calculator](https://www.bajajfinserv.in/investments/nippon-india-sip-calculator) \| [ABSL SIP Calculator](https://www.bajajfinserv.in/investments/aditya-birla-sun-life-sip-calculator) \| [Groww SIP Calculator](https://www.bajajfinserv.in/investments/groww-sip-calculator) \| [LIC SIP Calculator](https://www.bajajfinserv.in/investments/lic-sip-calculator) \| ## Frequently Asked Questions What are ETFs in simple words? Exchange-Traded Funds (ETFs) are like baskets of assets, such as stocks, bonds, or commodities, that are traded on stock exchanges, providing investors with diversified exposure to these assets. What is the best ETF in India? The "best" ETF depends on your investment goals. Choose based on your objectives and risk tolerance. Can I sell ETF anytime? Yes, you can sell ETF shares anytime during market hours when the stock exchange is open. ETFs offer intraday liquidity, so you can trade them throughout the trading session. What is ETF’s full form? An ETF, or exchange-traded fund, is marketable security. It is an investment that trades like a stock but represents a collection of assets, such as stocks, bonds, or commodities. The primary goal of an ETF is to match the performance of a specific index, like CNX Nifty or BSE Sensex. When you buy an ETF, you are investing in a portfolio that reflects the performance of that index. Is ETF safe to invest in? ETFs can be a safe investment option if used wisely. They provide the benefits of diversification and flexibility. Indexed ETFs, which follow indexes like the S\&P 500, are usually considered safe as they grow in value over time. On the other hand, leveraged ETFs aim to increase returns but come with higher risk due to their increased volatility. Which is better, LIC or ETF? LICs (Listed Investment Companies) generally have higher fees than ETFs because they are actively managed and have a closed-end structure. Despite leading to higher fees, this active management offers several advantages, such as expert stock selection and strategic adjustments. Additionally, LICs provide benefits like purchase discounts. ETFs, on the other hand, are usually passively managed and open-ended. They carry comparatively lower fees and focus more on replicating an index. Which is the 1st ETF in India? Nifty Bees is India's first exchange-traded fund (ETF). It was launched by Benchmark Asset Management in December 2001. This ETF tracks the Nifty 50 Index and aims to replicate the performance of the top 50 companies listed on the National Stock Exchange (NSE) of India. How is ETF calculated? An ETF's daily Net Asset Value (NAV) is calculated by taking the most recent closing prices of all its holdings on a weighted basis. Then, any cash the ETF holds is added to these closing prices. From this total, any liabilities on the ETF's balance sheet are subtracted. The resulting amount is then divided by the total number of ETF shares outstanding. This gives the NAV per share, which shows the value of one share of the ETF. How to purchase ETF? To buy an ETF, start by setting up a brokerage account. Once your account is ready, use its screening tools to research and compare different ETFs. Find the ones that fit your investment goals. After selecting the ETFs you want to invest in, place a “trade order” through your brokerage account. Specify the number of shares you wish to purchase, and your brokerage will execute the order on your behalf. What are the disadvantages of ETFs? ETFs come with fees that reduce your returns. Sometimes, their prices deviate from the value of the underlying assets. Also, ETFs are not always the best option for tax efficiency, as they generate taxable returns. Moreover, like any investment, ETFs carry risks. This primarily includes market risk and the likelihood of loss of principal. Is ETF better than mutual fund? ETFs can be considered better than mutual funds for certain investors due to their lower expense ratios, intraday trading flexibility, and tax efficiency. However, mutual funds may offer automatic investment strategies and professional management, making them suitable for those who prefer a more hands-off approach to investing. Is ETF a good investment? Yes, ETFs can be a good investment option, offering diversification, liquidity, and low costs. They provide exposure to various asset classes and sectors, making it easier for investors to build a balanced portfolio. However, individual goals and risk tolerance should be considered when investing in ETFs. Do ETFs pay dividends? ETFs can pay dividends if the securities they hold generate dividend income. Dividends paid by the underlying companies are collected by the ETF provider and passed on to investors, usually on a quarterly basis, in proportion to the number of ETF units held. If the underlying holdings do not pay dividends, the ETF will not distribute any. Some ETFs are specifically designed to focus on dividend-paying companies and are commonly referred to as dividend ETFs. Can you sell an ETF at any time? Yes, ETFs can be traded on the stock exchange throughout market hours, similar to individual stocks. This allows investors to buy or sell ETF units during the trading day and respond to real-time price movements. In contrast, mutual fund transactions are processed only after market hours at the day’s closing net asset value. Do ETFs pay dividends? Yes, ETFs may pay dividends if the underlying securities in the fund distribute dividends. When companies included in the ETF declare dividends, the fund collects this income and passes it on to investors based on the number of ETF units they hold. These payouts are usually distributed periodically, such as quarterly. However, if the ETF’s underlying assets do not generate dividend income, the ETF will not provide dividend payouts. Some ETFs are specifically designed to focus on dividend-paying companies and aim to generate regular income for investors. Can you sell an ETF at any time? Yes, ETFs can generally be bought or sold anytime during market trading hours through stock exchanges. This allows investors to trade ETF units throughout the day and potentially benefit from price movements during the trading session. In contrast, mutual funds are usually transacted at the day’s closing net asset value (NAV), which is calculated after the market closes. Show More Show Less ## Related Articles - [![](https://www.bajajfinserv.in/content/dam/bajajfinserv-investment-marketplace/adp/what-is-a-folio-number.jpg)Mutual Fund Units 7584 3 mins read](https://www.bajajfinserv.in/investments/mutual-fund-units "Mutual Fund Units") - [![](https://cms-assets.bajajfinserv.in/is/image/bajajfinance/a-beginners-guide-to-mutual-fund-asset-classes?scl=1)Asset Classes 750 4 mins](https://www.bajajfinserv.in/investments/understanding-mutual-fund-asset-classes "Asset Classes") ## Related Videos - [![Fixed Deposits versus other investment options](https://cms-assets.bajajfinserv.in/is/image/bajajfinance/gcc-623d4f9a-e2bc-4a94-a926-3561e3653a59-1?scl=1) 00:24 ‌ Fixed Deposits versus other investment options]() ## Bajaj Finserv app for all your financial needs and goals Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals. 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Readable Markdown	1. [Home](https://www.bajajfinserv.in/ "Home") 2. [Investments](https://www.bajajfinserv.in/investments "Investments") 3. [Mutual Funds](https://www.bajajfinserv.in/investments/mutual-funds "Mutual Funds") 4. What is an ETF 324 3 mins 13-January-2026 ETF's full form is an exchange-traded fund. It is a type of security that mirrors the performance of an index, commodity, bonds, or collection of assets, much like an index fund. In simple words, ETFs are funds that track various indexes, such as the CNX Nifty or the BSE Sensex, among others. In recent years, India's financial markets have witnessed substantial growth and innovation, providing investors with an array of investment options. Among these, Exchange-Traded Funds (ETFs) have emerged as a popular and accessible mutual fund investment option, gaining significant traction among Indian investors. ETFs have brought a new dimension to the Indian investment landscape, offering benefits that align well with the preferences and requirements of Indian investors. In this article, we will learn about the ETF meaning, how ETF work, and know about the different types of ETFs available. Also, we will check their advantages and associated risks and learn some key factors to consider before investing in ETFs. ## What Is an Exchange-Traded Fund (ETF)? An Exchange-Traded Fund (ETF) is a marketable financial product traded on stock exchanges, much like individual stocks. The term ETF reflects its nature as an investment fund that holds a diverse portfolio of assets. Unlike a single stock representing one company, an ETF consists of a collection of securities. These may include stocks, bonds, commodities, or other instruments, providing investors with a convenient way to achieve diversification. ETFs are designed to track the performance of specific indices, such as the CNX Nifty or the BSE Sensex, making them an efficient way for investors to gain exposure to broader market movements. One of the primary advantages of ETFs is their liquidity; investors can buy and sell shares throughout the trading day at market prices. Additionally, ETFs typically have lower expense ratios compared to [mutual funds](https://www.bajajfinserv.in/investments/mutual-funds), making them an attractive option for cost-conscious investors. With their diverse range of offerings and easy accessibility, ETFs have become increasingly popular in recent years, appealing to both novice and seasoned investors seeking to diversify their portfolios. Let's explain the process of creating and redeeming ETF units using an example of a commodity, like gold: Imagine there's an ETF that tracks the performance of gold prices. To make this ETF work, a special player called the "authorized participant" (AP) comes into the picture. APs are usually big financial institutions or market makers. ## Here's how it works: 1. Creating ETF Units: When there is demand for more shares of the [gold ETF](https://www.bajajfinserv.in/investments/gold-etf), the AP steps in. They acquire the actual gold, just like physical gold bars or gold certificates, that will represent the value of t’e ETF's shares. They then deliver this gold to the ETF's manager/ AMC, who takes care of the ETF's assets. In return for delivering the gold, the ETF's manager/ [AMC](https://www.bajajfinserv.in/investments/unravelling-the-role-of-asset-management-companies) creates new units of the ETF. These new units are then transferred to the AP. So, the AP now has units in the ETF that represent a portion of the total gold held by the ETF. 2. Redeeming ETF Units: Now, let's say an investor wants to sell their units of the gold ETF. The AP buys those ETF units from the investor. When the investor sells their ETF units, the AP takes those units and redeems them back to the ETF's manager/ AMC. In exchange, the ETF's manager gives the AP the corresponding amount of actual gold, just like the gold bars or certificates or cash that the ETF is holding. ## Why invest in ETFs? Investing in Exchange-Traded Funds (ETFs) offers numerous advantages, making them an attractive option for various investors. ETFs provide instant diversification by holding a basket of securities, reducing risk compared to investing in individual assets. They are cost-effective due to their low expense ratios and typically lower management fees. ETFs also offer flexibility, as they can be traded like stocks throughout market hours, providing liquidity and ease of access. Additionally, they cater to various investment goals, with options ranging from equity and bonds to sector-specific and international markets. Their transparency ensures that investors know the underlying holdings, enabling informed decisions. \| \| \| \|---\|---\| \| Reason \| Description \| \| Diversification \| ETFs hold a mix of securities, spreading risk across different investments. \| \| Cost-effective \| Low expense ratios and minimal management fees compared to mutual funds. \| \| Liquidity and flexibility \| Traded like stocks, ETFs allow buying and selling during market hours. \| \| Variety of options \| Offers access to equities, bonds, sectors, and international markets. \| \| Transparency \| Holdings are disclosed regularly for investor awareness. \| ## Keeping the ETF's Market Price in Line: The process of creating and redeeming ETF units is essential for making sure the price of the ETF on the stock exchange stays very close to the actual value of the gold it holds. The Buy and Sell price of ETFs should lie in the close range of its real-time [NAV](https://www.bajajfinserv.in/investments/nav-explained) for maintaining product efficiency. In summary, the creation and redemption mechanism with the help of authorized participants (APs) ensures that the price of the gold ETF on the stock exchange closely reflects the true value of the gold it holds. This way, investors can buy or sell shares of the gold ETF at a price that is fair and transparent, based on the actual value of the underlying commodity - gold. ## Types of ETFs in India Indian investors can choose from a diverse range of ETFs to suit their investment objectives and risk appetites. Some of the common types of ETFs available in the Indian market include: 1. Index ETFs: These ETFs aim to replicate the performance of a specific stock market index, such as the Nifty 50 or the Sensex. They provide investors with exposure to a broad market segment or a specific sector/ Smart-Beta Strategy. 2. Gold/ Silver ETFs: Gold/ Silver ETFs allow investors to invest in the price movements of gold/ silver without physically owning the precious metal. 3. Sectoral ETFs: Sector-specific ETFs enable investors to focus on particular industries or sectors, like banking, technology, or energy, etc. 4. Bond ETFs: Bond ETFs invest in benchmark indices of fixed-income securities, including government bonds and corporate bonds, catering to investors seeking income and stability 5. International ETFs: These ETFs provide investors with exposure to international markets and assets via international Indices (viz. S\&P 500, Nasdaq 100, etc) allowing them to diversify globally. 6. Smart Beta ETFs: These ETFs utilize alternative index construction methodologies, focusing on factors like low volatility, high dividend yield, quality, momentum, Alpha, etc rather than traditional market capitalization-based indices. 7. Commodity ETFs: These ETFs track the price movements of commodities like oil or precious metals. 8. Passive ETFs: Passive ETFs aim to replicate the performance of a specific market index. In India, these funds commonly track indices such as the Nifty 50, Sensex, or sectoral indices. Since they simply mirror the index composition, passive ETFs generally have lower expense ratios and are widely used by investors seeking cost-efficient market exposure. 9. Actively Managed ETFs: Unlike passive ETFs, actively managed ETFs do not track a specific index. Instead, professional fund managers actively select and manage securities in the portfolio based on market opportunities and research. While these ETFs offer the potential to outperform benchmarks, they typically have higher management costs compared to passive ETFs. 10. Bitcoin / Crypto ETFs: Spot Bitcoin ETFs were approved by the U.S. Securities and Exchange Commission (SEC) in 2024, allowing investors in the U.S. to gain exposure to Bitcoin through traditional brokerage accounts. However, in India, cryptocurrency ETFs are not currently approved or listed on Indian exchanges, and investors cannot access such products through domestic ETF platforms. 11. Leveraged ETFs: Leveraged ETFs aim to generate multiples of the returns of an underlying index, such as 2× or 3× the daily movement. These funds use derivatives and borrowed capital to amplify returns. However, leveraged ETFs are not widely available in the Indian ETF market, and Indian regulators generally take a cautious approach toward such high-risk products. ## Advantages of ETFs for Indian Investors 1. Affordability: ETFs offer a cost-effective investment solution with relatively lower [expense ratios](https://www.bajajfinserv.in/investments/what-is-expense-ratio), making them an attractive choice for cost-conscious Indian investors. 2. Diversification: ETFs provide diversification by investing in a basket of securities, reducing exposure to individual stock risks. 3. Liquidity: Being listed on stock exchanges, ETFs offer intraday liquidity, allowing investors to buy or sell units at prevailing market prices throughout the trading day. 4. Taxation: Taxation for ETFs depend on the underlying stock. Index and sectoral ETFs are regarded as equity-oriented ETFs when it comes to tax. As a result, [short-term capital gains](https://www.bajajfinserv.in/investments/understanding-short-term-capital-gains-tax) on ETF units retained for less than a year are taxed at a rate of 15%. Long-term capital gains on units maintained for over a year are levied at a rate of 10%, without the benefit of indexation. Long-term capital gains up to Rs. 1 lakh are exempt from tax. Gold ETFs and international ETFs are treated as non-equity funds for taxation purposes. if ETF units are held for less than 36 months, any short-term gains are taxed according to the relevant income tax bracket. [Long-term capital gains](https://www.bajajfinserv.in/investments/understanding-long-term-capital-gains-tax) from units held longer than a year are subject to a 20% tax, considering the indexation benefit. A note to be included wherever tax rates are mentioned. The note to state that the tax rates mentioned above are excluding surcharge if any and cess. 5. Transparency: ETFs regularly disclose their portfolios, NAVs enabling investors to make informed decisions about their investments. ## Exchange-Traded Funds (ETFs): Understanding Risks Exchange-Traded Funds (ETFs), like any other investment assets, come with [inherent risks](https://www.bajajfinserv.in/investments/what-is-inherent-risk) that investors need to be aware of before making investment decisions. Understanding these risks is essential to manage investments prudently and align them with individual financial goals and risk tolerance. Let's delve into some of the key risks associated with ETF investments in the Indian context: 1. Market Risk: ETFs are subject to [market risk](https://www.bajajfinserv.in/investments/what-is-market-risk), which refers to the potential losses stemming from overall market movements. If the market experiences a downturn, the value of the underlying assets in the ETF's portfolio can decrease, leading to a decline in the ETF's net asset value ([NAV](https://www.bajajfinserv.in/investments/nav-explained)) and market price. 2. Tracking Error: While ETFs aim to replicate the performance of a specific index or asset, there might be a slight disparity between the ETF's returns and the index it tracks. This difference is known as tracking error and can be influenced by factors such as transaction costs, management fees, and imperfect replication of the index. 3. Liquidity Risk: Although ETFs are traded on stock exchanges, the [liquidity](https://www.bajajfinserv.in/investments/liquidity-risk) of certain ETFs may vary. In times of market stress or if the underlying assets are illiquid, it may become challenging to buy or sell ETF units at the desired price, potentially resulting in higher bid-ask spreads. 4. Concentration Risk: Some ETFs are concentrated in specific sectors, industries, or [asset classes](https://www.bajajfinserv.in/investments/understanding-mutual-fund-asset-classes). If the particular sector or industry faces challenges or a significant event affects the asset class, the ETF's performance could be adversely impacted. 5. Currency Risk: For ETFs with international exposure, fluctuations in currency exchange rates can affect the returns for Indian investors. Currency risk arises when the investment is denominated in foreign currency, and changes in exchange rates can either enhance or erode investment gains. 6. Counterparty Risk: Some ETFs use financial derivatives or engage in securities lending to enhance returns. This introduces counterparty risk, which is the risk that the entity on the other side of the transaction might default or fail to fulfil its obligations. 7. Inherent Risk of Underlying Assets: ETFs invest in a diversified basket of assets, but the risk associated with the underlying assets remains. For instance, equity ETFs may be exposed to risks associated with the individual stocks in the portfolio, while bond ETFs may face interest rate risk and [credit risk](https://www.bajajfinserv.in/investments/credit-risk). 8. Regulatory and Taxation Risks: Changes in government regulations or tax laws can impact the returns and taxation of ETF investments, potentially affecting the attractiveness of certain ETFs. ## Pros and Cons of ETFs Pros - Diversified market exposure: ETFs allow investors to gain exposure to multiple companies across sectors through indices such as Nifty 50, Sensex, or sectoral indices. - Lower costs: Most ETFs in India have relatively low expense ratios compared to actively managed mutual funds. Brokerage charges are also generally minimal. - Diversification benefits: By tracking a basket of securities, ETFs help reduce the risk associated with investing in a single stock. - Targeted investment options: Investors can choose ETFs focused on specific sectors, themes, commodities like gold, or broader market indices. Cons - Higher costs for active ETFs: Actively managed ETFs may have higher expense ratios compared to passive index-tracking ETFs. - Limited diversification in sector ETFs: ETFs focused on a single sector or theme may increase concentration risk. - Liquidity concerns: Some ETFs listed on Indian exchanges may have lower trading volumes, which can affect ease of buying or selling units at desired prices. ## How is an ETF different from an index fund? An ETF (exchange-traded fund) differs from an index fund primarily in trading mechanisms and pricing. ETFs trade on stock exchanges like individual stocks, allowing for intraday buying and selling at fluctuating market prices. In contrast, index funds are bought and sold at the end of the trading day at the net asset value (NAV). Additionally, ETFs often have lower expense ratios and can be more tax-efficient due to their unique structure, whereas index funds may have minimum investment requirements. Both aim to replicate the performance of a specific index, but their trading flexibility and cost structures vary significantly. ## How do ETFs and mutual funds compare? ETFs and mutual funds are both investment vehicles offering diversification, but they differ in structure, trading, and costs. ETFs trade on stock exchanges like individual stocks, allowing investors to buy and sell throughout market hours. In contrast, mutual funds are bought or redeemed at the day's Net Asset Value (NAV). ETFs typically have lower expense ratios due to their passive management approach, while mutual funds may have higher costs from active management. ETFs are more tax-efficient, as their structure minimises capital gains distributions. Mutual funds often require a minimum investment, but ETFs can be purchased in single units. While ETFs offer real-time pricing, mutual funds provide convenience through [systematic investment plans](https://www.bajajfinserv.in/investments/what-is-sip) (SIPs). Choosing between the two depends on an investor’s preferences for trading flexibility, cost structure, and investment strategy, with ETFs suiting short-term or cost-conscious investors and mutual funds appealing to those seeking long-term active management. ## Do ETFs provide diversity? Yes, ETFs provide diversity by offering exposure to a wide range of assets within a single investment. Each ETF typically holds a basket of securities, which may include stocks, bonds, commodities, or real estate, reflecting various sectors or market indices. This diversification reduces individual [investment risk](https://www.bajajfinserv.in/investments/investment-risk), as poor performance in one security can be balanced by gains in others. Additionally, investors can access niche markets or specific themes through targeted ETFs, enhancing their portfolio's breadth. Overall, ETFs serve as an effective tool for investors seeking to achieve a diversified investment strategy while maintaining liquidity and flexibility. ## How much do ETFs cost? ETFs are generally considered a cost-efficient investment option. The primary cost involved is the expense ratio, which covers fund management, administration, and operational expenses. For most equity ETFs, this expense ratio is relatively low compared to other investment products. In addition to this, investors may incur brokerage charges when buying or selling ETF units on the stock exchange. Some platforms may also apply small transaction or demat-related charges. Since ETFs are passively managed in most cases, their overall costs tend to remain lower, helping investors retain a larger share of their returns over the long term. ## ETF creation and redemption ETF creation and redemption is a process handled by authorised participants, usually large institutional investors. When demand for an ETF increases, authorised participants create new ETF units by delivering a basket of underlying securities to the fund house. In return, they receive ETF units, which are then sold on the stock exchange. Conversely, when supply exceeds demand, ETF units are redeemed by returning them to the fund house in exchange for the underlying securities. This mechanism helps keep the ETF’s market price close to its net asset value and ensures liquidity in the market. ## How to find the right ETFs for your portfolio Choosing the right ETFs starts with understanding your investment goals, time horizon, and risk tolerance. Investors should first identify whether they want exposure to equities, debt, commodities, or international markets. Evaluating the ETF’s underlying index is equally important, as it determines performance and risk characteristics. Expense ratios should be compared, as lower costs can improve long-term returns. Liquidity is another key factor, so checking average trading volumes and bid-ask spreads is useful. Investors should also review the fund size and tracking error to assess efficiency. Aligning ETF selection with overall asset allocation helps create a balanced and goal-oriented portfolio. ## ETFs vs mutual funds vs stocks When compared with other investment options, exchange-traded funds offer several distinct advantages. Lower costs, broad diversification, and flexibility are some of the reasons ETFs are widely preferred. Below is a comparison highlighting key differences between ETFs, mutual funds, and individual stocks. \| \| \| \| \| \|---\|---\|---\|---\| \| Aspect \| Exchange-traded funds (ETFs) \| Mutual funds \| Individual stocks \| \| Fees \| Average equity ETF expense ratio is around 0.15% \| Average equity mutual fund expense ratio is about 0.42%, along with possible additional charges \| Brokerage or commission fees, often zero but may go up to \$5 \| \| How to buy \| Bought and sold during regular and extended market hours \| Transactions are processed after market close at the day’s NAV \| Bought and sold during regular and extended market hours \| ## Factors to Consider Before Investing in ETFs 1. Investment Objective: Determine your investment goals, whether it's capital appreciation, income generation, or diversification. Choose an ETF that aligns with your objectives. 2. Asset Class and Sector: ETFs cover various asset classes and sectors. Assess your [risk tolerance](https://www.bajajfinserv.in/investments/what-is-risk-tolerance) and preference for sectors like technology, healthcare, or commodities before investing. 3. Expense Ratio: Evaluate the ETF's expense ratio, as lower fees can impact your overall returns. Look for cost-efficient options without compromising quality. 4. Liquidity: Ensure the ETF has sufficient trading volume and liquidity to buy and sell shares without significant price fluctuations. 5. Historical Performance: Examine the ETF's historical performance and its ability to track its underlying index accurately. Past performance isn't indicative of future results, but it provides insights into the ETF's tracking ability. ## Key takeaways - Trading mechanisms: ETFs differ from index funds in their trading structure; ETFs trade on stock exchanges like individual stocks, allowing intraday transactions at fluctuating prices, while index funds are traded at the end of the day at their net asset value (NAV). - Diversity in investment: ETFs offer significant diversity by holding a collection of various securities, such as stocks, bonds, or commodities, which helps to mitigate individual investment risk and provides broader market exposure. - Cost efficiency: Generally, ETFs have lower expense ratios compared to index funds, making them a cost-effective option for investors seeking diversification and flexibility in their portfolios. ## Conclusion While ETFs offer several advantages, it is crucial to recognize and manage the inherent risks associated with these investment vehicles. By adopting a well-informed and balanced approach, investors can leverage the [benefits of ETFs](https://www.bajajfinserv.in/investments/advantages-of-etfs) while navigating potential risks effectively. Consulting with a financial advisor and conducting thorough due diligence are essential steps to make informed investment decisions and align ETF investments with individual financial goals and risk tolerance. Discover a wide selection of ETFs with comprehensive analysis for informed investing on the Bajaj Finserv platform. ETFs provide diversification by investing in various stocks or bonds, effectively reducing overall portfolio risk. Moreover, they are easily accessible, allowing you to buy and sell throughout the trading day. Start your ETF investment journey with us today\! ## Essential tools for mutual fund investors \| \| \| \| \| \|---\|---\|---\|---\| \| [Mutual Fund Calculator](https://www.bajajfinserv.in/investments/mutual-fund-calculator) \| [Lumpsum Calculator](https://www.bajajfinserv.in/investments/lumpsum-calculator) \| [Step Up SIP Calculator](https://www.bajajfinserv.in/investments/step-up-sip-calculator) \| [Systematic Investment Plan Calculator](https://www.bajajfinserv.in/investments/sip-calculator) \| \| [SBI SIP Calculator](https://www.bajajfinserv.in/investments/sbi-sip-calculator) \| [HDFC SIP Calculator](https://www.bajajfinserv.in/investments/hdfc-sip-calculator) \| [Axis Bank SIP Calculator](https://www.bajajfinserv.in/investments/axis-bank-sip-calculator) \| [ICICI SIP Calculator](https://www.bajajfinserv.in/investments/icici-sip-calculator) \| \| [Nippon India SIP Calculator](https://www.bajajfinserv.in/investments/nippon-india-sip-calculator) \| [ABSL SIP Calculator](https://www.bajajfinserv.in/investments/aditya-birla-sun-life-sip-calculator) \| [Groww SIP Calculator](https://www.bajajfinserv.in/investments/groww-sip-calculator) \| [LIC SIP Calculator](https://www.bajajfinserv.in/investments/lic-sip-calculator) \| Frequently Asked Questions Exchange-Traded Funds (ETFs) are like baskets of assets, such as stocks, bonds, or commodities, that are traded on stock exchanges, providing investors with diversified exposure to these assets. The "best" ETF depends on your investment goals. Choose based on your objectives and risk tolerance. Yes, you can sell ETF shares anytime during market hours when the stock exchange is open. ETFs offer intraday liquidity, so you can trade them throughout the trading session. An ETF, or exchange-traded fund, is marketable security. It is an investment that trades like a stock but represents a collection of assets, such as stocks, bonds, or commodities. The primary goal of an ETF is to match the performance of a specific index, like CNX Nifty or BSE Sensex. When you buy an ETF, you are investing in a portfolio that reflects the performance of that index. ETFs can be a safe investment option if used wisely. They provide the benefits of diversification and flexibility. Indexed ETFs, which follow indexes like the S\&P 500, are usually considered safe as they grow in value over time. On the other hand, leveraged ETFs aim to increase returns but come with higher risk due to their increased volatility. Show More Show Less Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals. You can use the Bajaj Finserv App to: - Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more. - Invest in fixed deposits and mutual funds on the app. - Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers. - Pay and manage your bills and recharges using the BBPS platform. 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The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same. Disclaimer: Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319 BFL does NOT: (i) provide investment advisory services in any manner or form: (ii) carry customized/personalized suitability assessment: (iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment. In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. 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