This blog is the second in our “ETF Investing in India” series. While the first part ( ETF Investing in India – Part 1 ) of the series gave the users a brief overview of what ETFs were, this blog will focus on the best ETF in India to choose for investing.
As an investment tool, ETFs give you the power to exploit the growth prospects of a particular country, sector ( IT, Pharma, Banking, etc ) or an index. In India, while we do have ETFs for USA and HongKong, the ETFs for other emerging markets are not yet there. Even for sectors, only the banking ETF has liquidity. The best ETF in India cover Nifty, Nifty Junior, Gold and Nasdaq.
Regularly investing index ETF’s give you the exposure of the entire market and keeps your profits running as and when the market goes up. Suppose you decide to monthly invest a fixed amount in an index ETF, you are able to buy different quantities of the fund every month. When the market is low, you get to buy more units and when it starts moving up, you get to buy lesser units. And in our growing economy, this seems the best investment for the long term. The only cost is the brokerage for buying it and the expense ratio you pay annually. This expense ratio is usually 0.75%-1%, also you get the benefit of dividend which the index companies pay. As the index comprises companies of every sector of the economy, you get a diversified exposure to risk.
Advantages of INDEX ETF:
- Spreads your risk over diverse sectors of the economy.
- Let’s you invest small amounts now to make money from the future bull rally.
- Gives you dividends from the index companies.
- The market men are very intelligent and always remove under-performing stocks from the index and add upward running stocks to it. It does sound safe.
It trades at the price of 1 gram of gold (Most cases). Every unit of this ETF is backed by 99.5% pure 1 gram gold. If you want to make money out of rising gold and can’t take the risk of the commodity markets then invest in the gold etf.
Advantages of GOLD ETF:
- No storage cost, no risk of loss due to theft, natural disaster or other matters out of our hands.
- A very small amount required to make monthly investment. As low as the price of 1 gram of gold.
- It can be bought and sold at the cost of an equity share during the market hours and has good liquidity.
- As Indians would never want to sell gold they hold unless they are bankrupt, ETF removes this psychological barrier
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The allocation range is what we follow in our Model ETF Portfolio. You can get access to our Model ETF Portfolio for free! To request access to the Model ETF Portfolio, provide your details to our team.
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