Basics of Stock Market - Advanced

Exchange Traded Funds

An ETF is a group of securities that trades like stocks. They are listed on an exchange every day at prices that fluctuate based on supply or demand. ETFs are like stocks, but do not have a net asset value (NAV). ETFs are different from other types of index funds in that they don't attempt to outperform the index but instead replicate its performance. ETFs aren't new, but they haven’t enjoyed the same popularity as traditional Mutual Funds.

There are many types of ETFs:

ETF Gold:

Units representing physical gold that can be either in paper or dematerialised form are called Gold ETFs. These units can be traded on an exchange just like any other stock. These units offer investors an opportunity to participate in the gold bullion marketplace without having to physically deliver gold.

Index ETF

Index ETF refers to ETFs that derive their value from an index.

There are many types of Index ETFs:

  • NIFTY BEES: An ETF that was launched Jan 2002 by Benchmark mutual funds.
  • Junior BEEs: A Benchmark mutual Fund launched an ETF on CNX Nift Junior in February 2003.
  • SUNDER A UTI-launched ETF in July 2003.
  • Liquid BEEs: A Benchmark Mutual Fund ETF was launched in July 2003.
  • bank BEEs A Benchmark Mutual Fund ETF was launched in May 2004.
  • Shariah - Goldman Sachs Nifty Shariah Index Traded Scheme launched August 22, 2011.

International ETF

An international ETF invests foreign-based securities. These ETFs use an international index such as HANG SENG, NASDAQ or HANG SENG for their underlying tracking instrument.

Sector-specific ETF:

These ETFs track a specific sector, such as bank and infrastructure.

Advantages of an ETF

  • ETF trading is easy because it can be traded during market hours.
  • ETFs listed on exchanges have lower distribution costs and a wider reach.
  • You can purchase a single unit of ETF
  • ETFs are similar to index funds and have high transparency.
  • One unit is the minimum investment

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Bond Market

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