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ETFs explained in simple terms

What are ETFs with a simple example in 60 secs

Let’s say you want to buy top 50 stocks listed on NSE.

Your option 1 is to buy each stock individually so you will end up doing 50 transactions.

Your option 2 is to buy ETFs that contains all these 50 stocks.

So I can call this ETF as a stock of stocks or basket of stocks.

In option 2 you only need to do 1 transaction to buy all 50 stocks. Tomorrow if you want to sell all these 50 stocks, you just sell the ETF and consider all 50 as sold.

Now who creates this ETFs? So ETFs are created by mutual fund companies and they work similar to mutual funds except that people can buy and sell ETFs on a stock exchange at live price very similar to a stock. And the biggest advantage is that ETFs are cheaper to buy as compared to mutual funds.

All Indians specially people in age group 20-30 must invest in equities to grow their wealth in long term. India is now growing fast and every indian can take advantage by investing in ETFs even if they are beginners.

passive ETFs are a great way to start investing. ETFs are great for beginner's investing in indian stock market.

If you have any questions on ETFs, drop in the comments.

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