Surely, you must have seen the ad where Indian international cricketer Shikhar Dhawan explains what re exchange-traded funds (ETFs) are and why investments in ETFs are akin to making your ‘dream team’.
This ad is hard to miss where Dhawan talks about why ETFs and mutual funds are the perfect way to go about investing.
An ETF stands for Exchange Traded Fund, which unlike regular mutual funds, trades like a common stock on a stock exchange.
The units of an ETF are usually bought and sold through a registered broker of a recognised stock exchange.
The units of an ETF are listed in stock exchanges and the net asset value (NAV) varies as per market movements
In the simple terms, ETFs are funds that track indexes such as Nifty 50 or BSE Sensex, etc. When you buy shares/units of an ETF, you are buying shares/units.
What makes ETFs different from stocks is that stocks represent shares within individual companies, whereas ETFs offer shares of multiple companies within a packaged bundle.
ETFs aren’t bound to a single company, so they can contain stocks in a particular sector or contain stocks that approximate a particular index, like the Nifty 50, which contains stocks in multiple sectors.
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