“Hi ! this week I am taking this opportunity

to give you better understanding concepts of

“Exchange Traded Funds (ETFs)”

What is an Exchange Traded Fund (ETF)?

A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.

Think of an exchange-traded fund as a mutual fund that trades like a stock.

Just like an index fund, an ETF represents a basket of stocks that reflect an index such as the S&P 500.

ETF, however, isn't a mutual fund; it trades just like any other company on a stock exchange.

Unlike a mutual fund that has its net-asset value (NAV) calculated at the end of each trading day,an ETF's price changes throughout the day, fluctuating with supply and demand.

It is not uncommon to see a 1% or more difference between the actual index's year-end return and that of an ETF.

Why ETFs are better than Mutual Funds?

Tax Benefits - ETFs only incur capital gains taxes when the fund is sold. In a mutual fund, capital gain taxes are incurred as the shares within the fund are traded during the life of the investment.

Simplicity -When you buy or sell an ETF, it is done at one price with one transaction. You are a trade away from opening or closing a position. With MF, shares in the asset are constantly being traded to hit a target price and seek a desired performance. Multiple trades, multiple prices.

Benefits of ETFs

Transparency - ETFs, whether index funds or actively managed, have transparent portfolios and are priced at frequent intervals throughout the trading day.

Lower costs – ETFs are not actively managed & because ETF are insulated from the costs of having to buy & sell securities to accommodate the share holders purchases & redemptions.ETFs typically have lower marketing, distribution & accounting expenses.

ETF v/s Open Ended Funds v/s Close Ended Funds

Parameter Open Ended Fund Closed Ended Fund Exchange Traded Fund

Fund Size Flexible Fixed Flexible

NAV Daily Daily Real Time

Liquidity Provider Fund itself Stock Market Stock Market / Fund itself

Sale Price At NAV plus load, if any

Significant Premium / Discount to NAV

Very close to actual NAV of Scheme

Availability Fund itself Through Exchange where listed

Through Exchange where listed / Fund itself.

Portfolio Disclosure Monthly Monthly Daily/Real-time

Uses Equalizing cash - Equalizing Cash, Hedging, Arbitrage

Intra-Day Trading Not possible Expensive Possible at low cost

Invest in through www.hdfcsec.com

Steps to trade in ETF

Log on to trading a/c

Click on buy / sell under Equity and Derivatives

Mention the ETF symbol, qty & price

Place Order

No. Exchange traded funds (ETF) on HDFC Securities Script Code1 UTI GOLD EXCHANGE TRADED FUND UTIGOLEQ2 BENCHMARK MUTUAL FUND BENMUTEQ3 KOTAK GOLD EXCHANGE TRADED FUND KOTGOLEQ4 BENCHMARK MUTUAL FUND-GOLD BENCHMARK ETS GOLBEEEQ5 S&P CNX NIFTY UTI ETF UTISUNEQ6 LIQUID BENCHMARK ETS LIQBENEQ7 NIFTY BMARK EXCH. TRD FND NIFBENEQ8 NIFTY JR BENCHMARK ETF NIFJUNEQ9 RELIANCE BANKING EXCHANGE TRADED FUND RELBANKEQ

10 PSU BANK BENCHMARK EXCHANGETRADED SCHEME PSUBNKBEESEQ11 KOTAK PSU BANK EXCHANGE TRADED FUND KOTAKPSUBKEQ12 QUANTUM INDEX FUND (ETF) QNIFTYEQ13 Quantum Gold Fund (ETF) QGOLDHALFEQ14 RELIANCE GOLD EXCHANGE TRADED FUND RELGOLDEQ15 SHARIAH BENCHMARK ETF (SHARIAH BEES) SHARIABEESEQ16 SBI GOLD EXCHANGE TRADED SCHEME SBIGETSEQ

Hope this series has given you clarity on basic concepts &

understanding before investing in ETFs

Your views is very important to me so, do post your feedback as it

helps me plan my future lessons.