EXCHANGE TRADED FUNDSubmitted ToProf. RKRHODDept. of Business Submitted By:Administration SUJOY KUMAR PAUL (03)AUS ABHISHEK DUTTA (07) PRITHWIRAJ DAS (08)
EXCHANGE TRADED FUND• ETFs are essentially mutual fund schemes or index funds that are listed and traded on the exchange like stocks. ETFs are priced continually and can be bought or sold through out the trading day. Buying or selling ETFs is as simple as buying or selling any other stock on the exchange allowing the investor to take advantage of intra day price movements.• ETF can be bought or sold just by a call to the broker or through the internet trading account. This provides investors the power to react swiftly to changes in the market and place limit orders while trading.
TYPES OF ETF• Index ETF• Commodity ETFs• Liquid ETFs
INDEX ETF• Most ETFs are index funds that hold securities and attempt to replicate the performance of a stock market index. An index fund seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index.
COMMODITY ETFS• Commodity ETFs invest in commodities, such as precious metals and futures. Among the first commodity ETFs were gold exchange-traded funds, which have been offered in a number of countries. The idea of a Gold ETF was first officially conceptualized by Benchmark Asset Management Company Private Ltd in India when they filed a proposal with the SEBI in May 2002.
LIQUID ETFS• Liquid ETFs are funds whose unit price is derived from Money market securities comprising of government bonds treasury bonds, call money market etc.ETFs are immediately tradable; therefore, the risk of price movement between investment decision and time of trade is substantially less when ETFs are used in lieu of traditional funds.
ETFs V/S Stocks and Mutual FundFunctionality ETFs Stocks Mutual Funds UnitCan be purchase through NSE Yes Yes Nobroker or online trading accountAbility to put limit orders Yes Yes NoReal time trading and pricing Yes Yes Nothroughout market hoursReturns at par with the Yes No Nomarket/index
ADVANTAGES OF ETFS1. Buy and sell just like share2. Buy and sell at real time shares3. One can put limit orders4. Delivery in your demat account5. Minimum trading lot just one unit6. No wealth tax7. No storage issue or fear of theft
HOW TO INVEST• Resister with your broker• Fill up the KYC form• Open a demat account
LOG INTO YOUR TRADINGSELECT AN ETF ACCOUNT OR CALL YOUR PLACE ORDER BROKER • ETFs are in dematerialized form and settled like any other share the T+2 rolling settlement.
WHAT IS THE ETF CREATION/REDEMPTION MECHANISM? Brokerage account Cash CashInves tor ETF Authorized Capital Markets Participants ETF Shares Securities Creation Units Basket of Securities ETF Fund Advisor 13
APPLICATIONS OF ETFS• Efficient Trading• Equitising Cash• Managing Cash Flows• Diversifying Exposure• Filling Gaps• Shorting or Hedging