Connect with us

Business

Exchange Traded Funds: Why You Should Invest in ETFs

Published

on


There are ETFs based on market capitalization, such as Nifty ETF, Sensex ETF, Midcap ETF, BSE 500 ETF, etc.

Stocks offer investors the opportunity to invest in stocks of companies that are likely to experience good growth. However, stocks as an asset class are inherently volatile and there are test periods when investors can face extreme volatility. The stock market tends to be volatile due to various factors that affect market sentiment and can lead to sudden price movements. For a retail investor, it might not be possible to stay up to date on all of these factors.

These sharp and often negative price movements can negatively impact investors’ equity investing experience. Without the knowledge and experience required, new investors can suffer significant losses. Caught in a whirlwind of market volatility, driven by a negative investment experience, some of these investors would be scarred for life and may never return to stocks, having lost faith in the asset class.

In order to mitigate such a negative experience, a cautious approach would be to use ETFs as a stepping stone to the equity markets. Most ETFs are index funds, that is, they hold the same securities as a stock index and that too, in the same weightings. Because they replicate the holdings of the index, they generate returns similar to the underlying index. For example, Nifty 50 Index ETF will hold all Nifty 50 shares in the same proportion as the index. Accordingly, the fund will reflect the returns generated by the Nifty 50 index. Likewise, BSE 500 ETF will invest in all 500 companies and investors will also have the opportunity to participate by investing in BSE 500 ETF. The NAVs of these plans increase or decrease in line with the rise or fall of the index.

Why ETFs?

ETFs are a great, convenient and one of the cheapest ways to gain exposure to stocks for investors who have long-term goals and want to invest in stocks without taking too much risk. The diversity of an ETF makes it less volatile than an individual stock. More importantly, in times of volatility, the declines seen in an index fund are likely to be less pronounced, unlike direct investing. By investing in ETFs, one can achieve market-linked returns without the added stress of stock selection or market timing. Additionally, ETFs are publicly traded and can be traded (bought or sold) at any time during market hours through a demat account.

By investing through ETFs, investors can take advantage of stocks in a diversified way and better risk-adjusted returns, eliminating all forms of emotional bias and equity-specific risks, which are the pitfalls of direct investing.

Over the past year, investors in India have become familiar with the concept of ETFs. The same was reflected in the number of folios for equity ETF plans. There has been unprecedented growth in terms of the number of ETF folios, with the number of folios more than doubling from 19 lakhs to 42.5 lakhs, over the past year, and as a result, the AAUM is increased from 1.5 lakh crore to 2.8 lakh crore.

Diversity of offers

Within the ETF universe itself, there are a variety of offerings available. There are market capitalization based ETFs such as Nifty ETF, Sensex ETF, Midcap ETF, BSE 500 ETF, etc. Apart from that, there are ETFs based on specific industries such as IT, banking, healthcare, etc. This means that if an investor is bullish on one industry, say the IT industry, and wants exposure to a bunch of names in the IT space, then investing in an IT ETF is a possibility.

Besides these simple offers, for a savvy investor there are also factor-based ETFs. Currently, most programs are based on factors namely alpha, low volatility, momentum, value and quality. These can be single factor funds or a combination of these factors. In conclusion, if you are an investor looking to invest in the stock markets, ETFs can be an interesting stepping stone.

by Nitin Kabadi, Head- ETF Business, ICICI Prudential AMC
Stocks offer investors the opportunity to invest in stocks of companies that are likely to experience good growth. However, stocks as an asset class are inherently volatile and there are test periods when investors can face extreme volatility. The stock market tends to be volatile due to various factors that affect market sentiment and can lead to sudden price movements. For a retail investor, it might not be possible to stay up to date on all of these factors.

These sharp and often negative price movements can negatively impact investors’ equity investing experience. Without the knowledge and experience required, new investors can suffer significant losses. Caught in a whirlwind of market volatility, driven by a negative investment experience, some of these investors would be scarred for life and may never return to stocks, having lost faith in the asset class.

In order to mitigate such a negative experience, a cautious approach would be to use ETFs as a stepping stone to the equity markets. Most ETFs are index funds, that is, they hold the same securities as a stock index and that too, in the same weightings. Because they replicate the holdings of the index, they generate returns similar to the underlying index. For example, Nifty 50 Index ETF will hold all Nifty 50 shares in the same proportion as the index. Accordingly, the fund will reflect the returns generated by the Nifty 50 index. Likewise, BSE 500 ETF will invest in all 500 companies and investors will also have the opportunity to participate by investing in BSE 500 ETF. The NAVs of these plans increase or decrease in line with the rise or fall of the index.

Why ETFs?

ETFs are a great, convenient and one of the cheapest ways to gain exposure to stocks for investors who have long-term goals and want to invest in stocks without taking too much risk. The diversity of an ETF makes it less volatile than an individual stock. More importantly, in times of volatility, the declines seen in an index fund are likely to be less pronounced, unlike direct investing. By investing in ETFs, one can achieve market-linked returns without the added stress of stock selection or market timing. Additionally, ETFs are publicly traded and can be traded (bought or sold) at any time during market hours through a demat account.

By investing through ETFs, investors can take advantage of stocks in a diversified way and better risk-adjusted returns, eliminating all forms of emotional bias and equity-specific risks, which are the pitfalls of direct investing.

Over the past year, investors in India have become familiar with the concept of ETFs. The same was reflected in the number of folios for equity ETF plans. There has been unprecedented growth in terms of the number of ETF folios, with the number of folios more than doubling from 19 lakhs to 42.5 lakhs, over the past year, and as a result, the AAUM is increased from 1.5 lakh crore to 2.8 lakh crore.

Diversity of offers

Within the ETF universe itself, there are a variety of offerings available. There are market capitalization based ETFs such as Nifty ETF, Sensex ETF, Midcap ETF, BSE 500 ETF, etc. Apart from that, there are ETFs based on specific industries such as IT, banking, healthcare, etc. This means that if an investor is bullish on one industry, say the IT industry, and wants exposure to a bunch of names in the IT space, then investing in an IT ETF is a possibility.

Besides these simple offers, for a savvy investor there are also factor-based ETFs. Currently, most programs are based on factors namely alpha, low volatility, momentum, value and quality. These can be single factor funds or a combination of these factors. In conclusion, if you are an investor looking to invest in the stock markets, ETFs can be an interesting stepping stone.

by Nitin Kabadi, Head- ETF Business, ICICI Prudential AMC

Get live stock quotes for BSE, NSE, US market and latest net asset value, mutual fund portfolio, see the latest IPO news, top IPOs, calculate your tax Using the income tax calculator, find out which markets are the best, the most losing and the best equity funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay up to date with the latest news and updates from Biz.



What Are The Main Benefits Of Comparing Car Insurance Quotes Online

LOS ANGELES, CA / ACCESSWIRE / June 24, 2020, / Compare-autoinsurance.Org has launched a new blog post that presents the main benefits of comparing multiple car insurance quotes. For more info and free online quotes, please visit https://compare-autoinsurance.Org/the-advantages-of-comparing-prices-with-car-insurance-quotes-online/ The modern society has numerous technological advantages. One important advantage is the speed at which information is sent and received. With the help of the internet, the shopping habits of many persons have drastically changed. The car insurance industry hasn't remained untouched by these changes. On the internet, drivers can compare insurance prices and find out which sellers have the best offers. View photos The advantages of comparing online car insurance quotes are the following: Online quotes can be obtained from anywhere and at any time. Unlike physical insurance agencies, websites don't have a specific schedule and they are available at any time. Drivers that have busy working schedules, can compare quotes from anywhere and at any time, even at midnight. Multiple choices. Almost all insurance providers, no matter if they are well-known brands or just local insurers, have an online presence. Online quotes will allow policyholders the chance to discover multiple insurance companies and check their prices. Drivers are no longer required to get quotes from just a few known insurance companies. Also, local and regional insurers can provide lower insurance rates for the same services. Accurate insurance estimates. Online quotes can only be accurate if the customers provide accurate and real info about their car models and driving history. Lying about past driving incidents can make the price estimates to be lower, but when dealing with an insurance company lying to them is useless. Usually, insurance companies will do research about a potential customer before granting him coverage. Online quotes can be sorted easily. Although drivers are recommended to not choose a policy just based on its price, drivers can easily sort quotes by insurance price. Using brokerage websites will allow drivers to get quotes from multiple insurers, thus making the comparison faster and easier. For additional info, money-saving tips, and free car insurance quotes, visit https://compare-autoinsurance.Org/ Compare-autoinsurance.Org is an online provider of life, home, health, and auto insurance quotes. This website is unique because it does not simply stick to one kind of insurance provider, but brings the clients the best deals from many different online insurance carriers. In this way, clients have access to offers from multiple carriers all in one place: this website. On this site, customers have access to quotes for insurance plans from various agencies, such as local or nationwide agencies, brand names insurance companies, etc. "Online quotes can easily help drivers obtain better car insurance deals. All they have to do is to complete an online form with accurate and real info, then compare prices", said Russell Rabichev, Marketing Director of Internet Marketing Company. CONTACT: Company Name: Internet Marketing CompanyPerson for contact Name: Gurgu CPhone Number: (818) 359-3898Email: [email protected]: https://compare-autoinsurance.Org/ SOURCE: Compare-autoinsurance.Org View source version on accesswire.Com:https://www.Accesswire.Com/595055/What-Are-The-Main-Benefits-Of-Comparing-Car-Insurance-Quotes-Online View photos



picture credit

ExBUlletin

to request, modification Contact us at Here or [email protected]