{"id":5506,"date":"2011-06-15T11:51:50","date_gmt":"2011-06-15T06:21:50","guid":{"rendered":"index.php\/2011\/06\/15\/what-are-etfs\/"},"modified":"2011-06-15T11:51:50","modified_gmt":"2011-06-15T06:21:50","slug":"what-are-etfs","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2011\/06\/15\/what-are-etfs\/","title":{"rendered":"What are ETFs?"},"content":{"rendered":"<div style=\"margin: 1em;width: 180px;float: left\" class=\"zemanta-img\"><a href=\"http:\/\/commons.wikipedia.org\/wiki\/File:Indian_Rupee_symbol.svg\"><img loading=\"lazy\" decoding=\"async\" style=\"border-bottom: medium none;border-left: medium none;border-top: medium none;border-right: medium none\" alt=\"The Symbol of Indian Rupee approved by the Uni...\" src=\"http:\/\/upload.wikimedia.org\/wikipedia\/commons\/thumb\/e\/ee\/Indian_Rupee_symbol.svg\/170px-Indian_Rupee_symbol.svg.png\" width=\"170\" height=\"250\"><\/a>  <\/p>\n<p style=\"font-size: 0.8em\" class=\"zemanta-img-attribution\">Image via <a href=\"http:\/\/commons.wikipedia.org\/wiki\/File:Indian_Rupee_symbol.svg\">Wikipedia<\/a><\/p>\n<\/div>\n<p><a class=\"zem_slink\" title=\"Exchange-traded fund\" href=\"http:\/\/en.wikipedia.org\/wiki\/Exchange-traded_fund\" rel=\"wikipedia\">ETFs<\/a> are fast becoming a popular choice for passive investors who would like to stay invested in the stock market without having to paying large fees to investment managers. One can think of an ETF as<\/p>\n<ul>\n<li>a <a class=\"zem_slink\" title=\"Mutual fund\" href=\"http:\/\/en.wikipedia.org\/wiki\/Mutual_fund\" rel=\"wikipedia\">mutual fund<\/a> that can be traded on the stock exchange as any stock\n<li>an <a class=\"zem_slink\" title=\"Index fund\" href=\"http:\/\/en.wikipedia.org\/wiki\/Index_fund\" rel=\"wikipedia\">index fund<\/a> that tracks a popular index (Nifty 50, Junior Nifty, etc\u2026)\n<li>a <a class=\"zem_slink\" title=\"Passive management\" href=\"http:\/\/en.wikipedia.org\/wiki\/Passive_management\" rel=\"wikipedia\">passive investment<\/a> vehicle that doesn\u2019t depend on a manager\u2019s stock-picking ability<\/li>\n<\/ul>\n<p>Essentially, an ETF will be a basket of stocks, much like a mutual fund. It will typically track an index with much lower fees compared to a mutual fund. And investors can trade in and out of ETFs on the stock market through their trading accounts.<\/p>\n<p>Some of the popular ETFs in India are the <a href=\"http:\/\/stockviz.biz\/StockDive.aspx?TICKER=NIFTYBEES\" target=\"_blank\">NIFTYBEES<\/a> (tracking the Nifty 50 index), <a href=\"http:\/\/stockviz.biz\/StockDive.aspx?TICKER=JUNIORBEES\" target=\"_blank\">JUNIORBEES<\/a> (tracking the Junior Nifty) and the Bank ETFs <a href=\"http:\/\/stockviz.biz\/StockDive.aspx?TICKER=KOTAKPSUBK\" target=\"_blank\">KOTAKPSUBK<\/a> &amp; <a href=\"http:\/\/stockviz.biz\/StockDive.aspx?TICKER=BANKBEES\" target=\"_blank\">BANKBEES<\/a>.<\/p>\n<p>The three things to look out for while investing in ETFs is the total annual expense ratio (should be &lt; 1%), <a class=\"zem_slink\" title=\"Tracking error\" href=\"http:\/\/en.wikipedia.org\/wiki\/Tracking_error\" rel=\"wikipedia\">tracking error<\/a> (&lt; 0.5% annualized) and liquidity (there should a fair amount of daily trading activity).<\/p>\n<p>In the recent past, fund houses have tried to capitalize on sector specific ETFs with varying degree of success. For example, there are more than a dozen Gold ETFs listed in the <a class=\"zem_slink\" title=\"National Stock Exchange of India\" href=\"http:\/\/maps.google.com\/maps?ll=19.0602777778,72.8597222222&amp;spn=0.01,0.01&amp;q=19.0602777778,72.8597222222 (National%20Stock%20Exchange%20of%20India)&amp;t=h\" rel=\"geolocation\">NSE<\/a>. However, the primary problem with commodity ETFs that don\u2019t hold the physical underlying is that the tracking error tends to get compounded over a period of time and may not reflect the price actions accurately.<\/p>\n<p>ETFs have traditionally worked great at tracking broad, liquid indexes and remain the preferred way to get passive <a class=\"zem_slink\" title=\"Market exposure\" href=\"http:\/\/en.wikipedia.org\/wiki\/Market_exposure\" rel=\"wikipedia\">market exposure<\/a>.<\/td>\n<\/p>\n<div class=\"zemanta-related\">\n<h6 style=\"font-size: 1em\" class=\"zemanta-related-title\">Related articles<\/h6>\n<ul class=\"zemanta-article-ul\">\n<li class=\"zemanta-article-ul-li\"><a href=\"http:\/\/www.fool.com\/investing\/etf\/2011\/06\/14\/who-sneaked-these-high-risk-stocks-into-your-portf.aspx\">Who Sneaked These High-Risk Stocks Into Your Portfolio?<\/a> (fool.com)\n<li class=\"zemanta-article-ul-li\"><a href=\"http:\/\/www.marketwatch.com\/story\/will-the-bear-bite-us-again-2011-06-14?siteid=rss&amp;rss=1\">John Nyaradi&#8217;s ETF Edge: Will the bear bite us again?<\/a> (marketwatch.com)\n<li class=\"zemanta-article-ul-li\"><a href=\"http:\/\/www.theglobeandmail.com\/globe-investor\/funds-and-etfs\/etfs\/five-etf-flaws-you-shouldnt-overlook\/article2045102\/\">Five ETF flaws you shouldn&#8217;t overlook<\/a> (theglobeandmail.com)\n<li class=\"zemanta-article-ul-li\"><a href=\"http:\/\/www.marketwatch.com\/story\/mutual-funds-lose-their-battle-with-etfs-2011-06-08?siteid=rss&amp;rss=1\">Chuck Jaffe: Mutual funds lose their battle with ETFs<\/a> (marketwatch.com)<\/li>\n<\/ul>\n<\/div>\n<div style=\"margin-top: 10px;height: 15px\" class=\"zemanta-pixie\"><a class=\"zemanta-pixie-a\" title=\"Enhanced by Zemanta\" href=\"http:\/\/www.zemanta.com\/\"><img decoding=\"async\" style=\"border-bottom-style: none;border-left-style: none;border-top-style: none;float: right;border-right-style: none\" class=\"zemanta-pixie-img\" alt=\"Enhanced by Zemanta\" src=\"http:\/\/img.zemanta.com\/zemified_e.png?x-id=86d27a3f-72e0-4897-bbce-94bbe5eef813\"><\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Image via Wikipedia ETFs are fast becoming a popular choice for passive investors who would like to stay invested in the stock market without having to paying large fees to investment managers. One can think of an ETF as a mutual fund that can be traded on the stock exchange as any stock an index &hellip; <\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[28],"class_list":["post-5506","post","type-post","status-publish","format-standard","hentry","category-your-money","tag-basic","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/5506","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=5506"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/5506\/revisions"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=5506"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=5506"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=5506"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}