An ETF is one of the most innovative instruments EVER to be created. In countries like US the answer would be obvious - ETF. But in case of India no so much. We hardly have nay choice when to comes to ETF’s. There are just about 31 odd ETF’s compared to over 2000+ in the united states.
In the developed markets ETFs are a rage. In 2016 the global ETF inflows were on an average $12000 dollars a second or Rs 7,79,280 (at 64.94).
In India the total AUM of ETFs is just over $4 billion compared to the $3 trillion in US. But however the popularity seems to be increasing thanks in no small part to the govt. The govt of India as part of is divestment program launched 2 ETFs CPSE ETF and the recent Bharat 22 ETF. From what I could tell the response to Bharat 22 was solid.
ETFs are passive instruments which track an Index or asset and since they are passive the cost is extremely low. The Expense ratio of an Equity MF will be in the range 1.5%, while the Expense ratio of Bharat 22 ETF was 0.0095%. But cost doesn’t guarantee returns especially when you don’t have much choice. For now at least in the Indian context MFs are the better choice.
I am not discouraging you from investing in ETFs. If you are a novice and if you would like to invest the most well known stocks, you could simply but a Nifty ETF offered by AMCs such as SBI or Kotak. You can also invest in the NASDAQ-100 ETF by MOSL if you would like to have exposure to international stocks.
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