EQUITY - ETF

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Is ETF an equity?

What are ETFs and Equities? ... An ETF, or Exchange Traded Fund, is a collection of securities such as equities, bonds, and options that is bought and sold like a stock in real time on a stock exchange. Most ETFs are not actively managed, but instead are designed to track an index. Equity ETFs are passive investment instruments that are based on indices and invest in securities in same proportion as the underlying index. Because of its index mirroring property, there is a complete transparency on the holdings of an ETF. Further due to its unique structure and creation mechanism, the ETFs have much lower expense ratios as compared to mutual funds.

ETF shares are created by a process called creation and redemption, which occurs on fund level in the primary market. It allows authorised participants – such as institutional trading desks and other approved market makers – to exchange baskets of securities or cash for ETF shares (and back again).

Now, let's look at six common types of ETFs.

  • Equity Funds. Most ETFs track equity indexes or sectors. ...
  • Fixed-Income Funds. ...
  • <>Commodity Funds. ...
  • Currency Funds. ..
  • Real Estate Funds. ...
  • Specialty Funds.. ...

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