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This question crops up in comments from time to time, and I thought it would be a good idea to do a quick post on it.
How to buy ETFs?
ETFs can be bought just like stocks, and if you already have a stock portfolio, buying an ETF should not present any problems to you at all. You have to find the symbol of your ETF, go through your broker, place a market or limit order for it, and you are done. That’s it – it’s that simple.
Possible cause of confusion
It is my conjecture that a little confusion is caused on this topic by the following two statements (both of which are true and seen often):
- ETFs can be traded like stocks
- ETFs can act as an alternate to mutual funds.
It is true that ETFs are like mutual funds because they hold positions in underlying assets such as stocks, future contracts, commodities etc. (like mutual funds).
However, the difference is that they trade on a stock exchange all day long like a stock (unlike a mutual fund). That also happens to be the dominant similarity they have with stocks.
It seems to be me that a lot of people hear that they can buy ETFs instead of mutual funds, and try to buy ETFs like they would buy mutual funds. But, when they are unable to do this, they get confused.
This is just a guess though, and it could well be that the question crops up because people are just unfamiliar with them. There is so much information on asset classes, risk management, asset allocation and other subjects of investment management — that sometimes it becomes difficult to know where to start, and find answers to even simple questions.
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{ 14 comments… read them below or add one }
I am still not clear about the ETF. Specially I am intersted in Gold ETF.The input given in your article is good.
Urs
O P Sharma
ETFs are like mutual funds. A mutual fund buys shares of another company or commodities like gold. Same way ETFs also buy assets.
The difference is that they will trade on a stock exchange like a stock. So unlike a mutual fund which has a NAV published at the end of the trading day, an ETF will have a price at all times.
Here is a list of Gold ETFs in India
http://www.onemint.com/2009/09/07/gold-etf-in-india/#comments
Thanks for response. Tomarrow I shall contact my broker and come back to you if there are still any doubts on the subject.
Thanks
Urs
O P Sharma
how many ETFs are there currently in indian market, and is there any regulating authority for them
Here is a list of Gold ETFs in India:
http://www.onemint.com/2009/09/07/gold-etf-in-india/
You can see a complete list on NSE’s website:
1. Goto http://www.nseindia.com/
2. Place your cursor over: ETFs
3. In the menu that appears, click on “ETFs launched on NSE”
how long a retail investor have to remain in the market to make a reasonable gain , well i know that in market nothing can be predict , but in advise form how can i select etf
Personally, I think to really make money in the market, investors should have very long horizons, upwards of five years or so. Not having a long term horizon leads to selling stocks in panic and booking heavy losses.
i have 600 gm of raw gold can i invest it in certain form , i doesn’t want to loose it (by selling it) nor want to deposit it in bank locker, please inform me to get best of it
I am not aware of any form in which you could invest it in (outside of the options you mention)
is there any NFO or IPO for ETFs to buy them fresh from the markets
ETFs have NFOs like mutual funds, and if you are looking to invest in newly launched funds, then that is the option for you.
how i can get fresh Etfs?
how i will identify that a particular NFO is for ETF or just an mutual funds’ NFO?
That will be mentioned in the offer document, so you can find it there. I think it will be normal for news articles to mention that too, so it won’t be that hard. If you had anything specific in mind, you can drop in a comment here too.