Knowledge Base

An ETF (Exchange Traded Fund) is a type of investment fund that is listed and traded on a stock exchange — just like a regular stock. It holds a basket of securities such as stocks, bonds, or commodities and tracks the performance of an underlying index or asset.

For example, a Nifty 50 ETF holds shares of all 50 companies in the Nifty 50 index in the same proportion. When the Nifty 50 goes up, the ETF’s value goes up and when it falls, the ETF falls too.

Both ETFs and mutual funds pool money from investors to buy a set of securities. The key difference is how you buy them. Mutual funds are bought at end-of-day NAV directly through a fund house. ETFs are bought and sold on the exchange during market hours at live prices just like a stock. This means you need a demat and trading account to invest in ETFs.

ETFs are available in different types in India:

• Index ETFs – track indices like Nifty 50 or Sensex
• Gold ETFs – track the price of physical gold
• Debt ETFs – invest in government securities or bonds
• Sectoral ETFs – focus on a specific sector like banking or IT

ETFs offer diversification at a low cost. Instead of buying 50 individual stocks, one Nifty 50 ETF gives you exposure to all 50 companies. The expense ratio on ETFs is also generally lower than actively managed mutual funds. You can buy and sell ETFs through your Samco trading account during market hours, the same way you place an order for any stock.