Investment
Investors want to take less risk after a major fall in the Indian stock market. Due to this, the demand for index funds and exchange-traded funds (ETF) has increased. The reason for increasing the demand of these two is more secure than the common mutual fund scheme. The index fund has become very fast in the market in the market. In such a situation, if you are also preparing to invest in index funds or ETFs to avoid the ups and downs of the market, then information about some things is important. Without this you will not be able to choose the right product. Let us know what is the basic difference between these two and who is right for whom.
Trading mechanism
The ETF is traded like shares in the stock market, and can be purchased or sold at market prices during the day. The index fund trading only once a day when the stock market is closing, and therefore trading on the basis of net asset value (NAV) when the stock market is closed.
Flexibility in investment
Investors can take advantage of changes in intraday value with the help of ETF, so they are suitable for investors who want to earn money by trading. Index funds are not as flexible in this context. They can only be sold or purchased only when trading day is closed, so they miss real -time trading.
Demat accounts
To invest in ETF, one must have a demat account as these funds are listed and traded on the stock exchange. The index fund does not require a demat account, making it a convenient option for an investor who does not want to keep an indirect mutual fund investment scheme. Therefore, if you do not want to participate directly in the markets and do not want to open a demat account then you can consider the index fund.
Investment through sip
Investors can invest in index funds under systematic investment schemes (SIP), under which they can invest a small amount every time for a certain period. This is not possible in most situations for ETF, and it may discourage some investors from using a systematic investment plan.
Expansion ratio
Typically, ETF is cheaper than index funds because they follow a passive management strategy and that is why the expans ratio is quite low. This is the main reason that ETF is most preferred among long -term investors who do not want to spend on fees but want to invest in market indices.
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