Interview about ETF in Sakal Times

Investment Suggestion column of Sakal Times:

Below is the excerpts from the interview but before that, a little briefing about ETF:

“An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity,bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. 

Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does.”

How can I choose my ETF Fund?

            This concept is based on a particular benchmark, which are as follows:

            1. Comparison of benchmarks of standardisation, which is known as Standard Deviation.       Now less the value of SD equals more the value of ETF. 

            2. The ETF whose average is less than the average of sensex is considered to be more active. 

            3. Like if you invest Equity Mutual Fund and Shares, you will be exempted of tax for one year, similarly, in Short Term CG, its 15% tax is cut-off. 

Ø ETF Fund is derivative type investment or future type investment?

            ETF Fund is dependent on special standard sensex.

Ø Which of Sensex ETF or Sensex MF is more lucrative?

             Sensex ETF is much more active than Sensex MF and gives less average expenditure. The cash holding capacity in ETF needs to be extensive, whereas, in MF even if it is not much, it will work. We can sell the shares of ETF in the market but, the shares of MF needs to be sold (NAV) at the end of the day.   

  - By Nilesh Bajaj, CEO, Cedrus Consultancy Pvt.Ltd.