Dilzer Consultants - Investments and Financial Planning

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Exchange Traded Funds

Ever thought of investing in a basket of blue chip stocks at a fraction of a cost? ETFs give you the convenience and ease to do just that. Exchange Traded Funds are essentially Index Funds that are listed and traded on exchanges like stocks. Globally, ETFs have opened a whole new panorama of investment opportunities not just to Institutional Money Managers, but to retail customers as well. They enable investors to gain broad exposure to entire stock markets in different countries and specific sectors with relative ease, on a real-time basis and at a lower cost than many other forms of investing.

We are now offering investing in international equity as an asset allocation tool to our clients, at the click of a button, at low cost and as a means of diversification across geographies.


 What are ETFs?

An ETF, or exchange traded fund, is a marketable security that tracks an index, a commoditybonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. Just like you buy shares in a stock, you can enter a buy order with your brokerage firm and buy any ETF you want.ETFs experience price changes throughout the day as they are bought and sold. They 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.


 Advantages of investing in ETFs

* ETF units can be easily bought or sold on exchange terminals

* Units can be bought or sold when the market is open at a price close to the NAv of the ETF.

* Flexibility of stock investing and diversification of Mutual Fund.

* Lower expense ratio than Mutual Funds.

* Minimum investment of one unit.


Costs associated with investing in ETFs

While the expense ratio of ETFs is generally lower than mutual funds; there are some costs unique to investing in ETFs. Just like buying or selling stocks, every time ETF units are purchased or sold, investor has to pay brokerage. When investing through mutual funds these costs are borne by the fund, which are included in the expense ratio of the fund and in turn passed on to the client by way of reduced NAV of their units.

Benefits of investing in ETFs over open-ended Mutual Funds

*Buying or selling ETFs is as simple as buying or selling stocks on any other stock exchange

* ETFs allow investors to take advantage of intraday market movements, which is not possible with open-ended Mutual Funds.

* Costs associated with ETFs are lesser than open-ended Mutual Funds.

Benefits of investing in ETFs over close-ended Mutual Funds

* Even though units of close-ended Mutual funds are listed on stock exchanges, they trade at substantial discounts to their NAVs resulting in loss to the investors

* In ETFs, the number of units issued are not limited and can be created / redeemed throughout the day. ETFs rely on market makers and arbitrageurs to maintain liquidity so as to keep the price in line with the actual NAV.

ETFs in India

A diverse lot of ETFs are available in India right from Equity ETFs, Gold ETFs to international Indices ETF. The Nifty ETF, tracks the Nifty 50, whereas Gold ETFs try to mirror the price of physical gold. International Indices ETF like Nasdaq ETF track the international index Nasdaq.


For more details on ETF options available, please contact us