How are ETFs and Mutual Funds Different?
The financial market of India has evolved greatly in the last few decades. There are several new financial instruments in the market that are known to deliver high returns; however, they also are associated with a high-risk factor. For those who want to invest in the equity market but don’t have the expertise of investing, opt for mutual funds. However, on the other hand, another financial instrument that’s seeing a spike in its demand is ETF – Equity Traded Fund. While ETFs and mutual funds have a lot in common, there’s also a lot that distinguishes them. In today’s blog, we’ll see how ETFs are different from mutual funds:
Way of management: A significant point of difference between ETFs and mutual funds is the way the fund is managed. In mutual funds, some are actively managed by the fund manager, and some are passively managed. On the other hand, ETF funds are mostly passively managed and are pegged against specific indexes.
Traded: ETFs are like equity stocks which are listed on the stock exchange. Their prices change throughout the day, just like any other equity stock. ETF funds can be bought at the market price during market hours. On the other hand, mutual fund prices change only once a day. ETF funds’ price is determined based on demand and supply.
Minimum investment: ETFs are traded on the stock exchange, and thus, there’s no minimum investment amount criteria. However, most mutual funds do have a minimum investment requirement.
Cost implication: The cost for managing an ETF Fund and Mutual Fund is different. Hence, the expense ratios of both ETF funds and mutual funds are different; however, ETFs also attract trading costs and transaction costs, as set by the Demat holding company on which one would typically buy or sell an ETF fund.
These are just some of the differences between ETFs and mutual funds. ETFs are good for you, if:
Trade actively: If you are someone who enjoys actively getting involved in trades, then ETFs are great for you. Before you invest in ETFs, you need to understand price fluctuations, demand-supply relations, and so on.
Time: ETF funds are great for those who have the time to keep a tab on their investments. If you won’t be able to dedicate time to your investments, ETFs might not be the right choice for you.
Control: If you like to have full control of your investments, but you don’t understand which stocks to choose, then ETFs are great for you. When you buy the best Indian ETFs, you get the same returns as a specific index.
When it comes to the best Indian ETFs, Motilal Oswal Mutual Fund is your answer. Motilal Oswal Mutual Fund is the best place for all your investments. They’ve been in the market for decades and have proved their expertise. If you want to know the best Indian ETFs, feel free to reach out to the experts.
