Is investing in ETFs a good option for a long term? Say NIFTY BEES? Are they liquid enough?

General
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ETF's are like mutual funds and they are as good as the underlying that they are trying to mimic. 

For example, NIFTY Bees tries to mimic the Nifty, so if you think Nifty is going to go up over the next 10 years, then yes, it is a good option to buy into Nifty BEES. Yes Nifty Bees are liquid enough. 

These are the various ETF's and the underlying they are trying to mimic, you can check this blogpost as well. 

Symbol Underlying Security Name
BANKBEES Bank Nifty Goldman Sachs Mutual Fund – Bank Nifty ETF
GOLDBEES Gold Goldman Sachs Mutual Fund – Gold ETF
GOLDSHARE Gold UTI Mutual Fund – Gold ETF
JUNIORBEES Junior Nifty Goldman Sachs Mutual Fund – Nifty Junior ETF
KOTAKGOLD Gold Kotak Mutual Fund – Gold ETF
KOTAKPSUBK CNX PSU Bank Index Kotak Mutual Fund – PSU Bank Index ETF
LIQUIDBEES Government Securities Goldman Sachs Mutual Fund – Liquidbees ETF
NIFTYBEES Nifty Goldman Sachs Mutual Fund – Nifty ETF
PSUBNKBEES CNX PSU Bank Index Goldman Sachs Mutual Fund – PSU Bank ETF
QGOLDHALF Gold Quantum Mutual Fund – Gold ETF
QNIFTY Nifty Quantum Mutual Fund – Nifty ETF
RELBANK Bank Nifty Reliance Mutual Fund – Bank Nifty ETF
RELGOLD Gold Reliance Mutual Fund – Gold ETF
SBIGETS Gold SBI Mutual Fund – Gold ETF
SHARIABEES Shariah Index Goldman Sachs Mutual Fund – Shariah Index ETF
KOTAKNIFTY Nifty Kotak Mutual Fund – Nifty ETF
HNGSNGBEES Hang seng Index Goldman Sachs Mutual Fund – Hang Seng ETF
RELIGAREGO Gold Religare Mutual Fund – Gold ETF
M50 Nifty Motilal Oswal Mutual Fund – Nifty ETF
HDFCMFGETF Gold HDFC Mutual Fund – HDFC Gold Exchange Traded Fund
IPGETF Gold ICICI Prudential Mutual Fund-ICICI Prudential Gold Exchange Traded Fund
INFRABEES CNX Infra Index Goldman Sachs Mutual Fund – Infra Goldman Sachs ETS
AXISGOLD Gold Axis Mutual Fund – Axis Gold ETF
M100 Midcap Motilal Oswal Mutual Fund – Midcap ETF
N100 Nasdaq100 Motilal Oswal Mutual Fund – Nasdaq ETF
BSLNIFTY Nifty Birla Sun Life Nifty ETF – Growth
IIFLNIFTY Nifty IIFL Mutual Fund – Nifty ETF
BSLGOLDETF Gold BIRLA SL GOLD ETF
RELGRNIFTY Nifty RELIGARE MF – NIFTY ETF
IDBIGOLD Gold IDBI Mutual Fund – IDBI Gold ETF
CRMFGETF Gold Canara Robeco Mutual Fund – Canara Robeco Gold Exchange Traded Fund
MGOLD Gold Motilal Oswal Mutual Fund – Motilal Oswal MOSt Shares Gold ETF
NIFETF Nifty ICICI Prudential Mutual Fund – ICICI Prudential Nifty ETF – GROWTH
RELCNX100 CNX100 R Shares CNX 100 Fund
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Nithin, just to add to Ankit’s question, can you also tell us which is the most liquid Gold ETF pls? Also, say I wish to invest around 50 lacs in Gold ETF, then I can punch a market order or is it wiser to punch a limit order?

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Gold BEES is the most liquid Gold ETF. You can buy 1 unit, no lots. Yes Demat is mandatory, and yes Indians can trade all ETF’s.

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@nithin One more thing I want to know; are these ETF (eg. NIFTYBEES) are trustworthy ie I want to hold them for lifelong and try to invest on a daily basis.

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Of course they are trustworthy. :slight_smile: They are run by some of the biggest AMC’s in India.

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@nithin now the goldmansacs goldbees is merged with reliance and called reliance gold etf i believe. Please clarify

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Yep. It was originally run by Benchmark, Goldman Sachs bought it out, now Reliance bought it out from Goldman Sachs.

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With niftybees manager Reliance Capital under pressure is it better to go with kotaknifty which is run by kotak bank?

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Reliance capital is exiting the mutual fund business to Nippon, so I guess that shouldn’t be the reason. With ETFs, the best ones are usually with lowest expense ratio and higher trading volumes/liquidity.

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Do ETFs have expiry date? How it is different from buying MFs mimicking the same index?

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No they don’t. An ETF is nothing but an MF that trades on the exchange.

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How about dividend? will I get dividends in proportion?

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Most ETFs reinvest dividends which show up in the NAV. Some pay out.

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This was really helpful. One message to cover basic ETF doubts!

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What happens if in the future, liquidity in an ETF dries. I want to invest large amount of money in Motilal Oswal N100 etf for long term. I am worried about its liquidity in the future.

How can I exit the fund in the future, if liquidity dries in the future?

@nithin @siva

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Invest in the Fund of fund instead of the ETF.

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I’m confused. So mutual fund companies (Eg Nippon Asset Mgmt) take money from retail public and form a fund (Eg. Nifty Bees) and use the collected funds to invest in NIFTY 50 companies. Say minimum investment is Rs. 13000 (pegged to Nifty), means my 13000 goes into Nippon NIFTY Bees’ fund whose NAV is in 1000s of crores.

But then NIFTYBEES are also traded on the stock exchange as stocks. Now how did those NIFTYBEES “stocks” get into the exchange? Did Nippon Asset Management do an “ipo” and float a portion of the mutual fund to the stock exchanges?

I know this is dumb but if someone could explain this it would be cool.

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The way ETFs are usually structured is by setting up a trust. This trust buys and sells the underlying securities from the open market, as per its mandate. So for instance, NIFTYBEES has the mandate of holding companies in the NIFTY, as per their weightage in the index.

When you buy a unit of an ETF that is listed on the market, you are essentially buying a share of ownership of all the assets held by this trust. The market price of the ETF at any given time might be different from the NAV (net asset value) that is declared every day.

The units of the ETFs are usually listed at the time the fund is launched, at the time of NFO. There is no separate “IPO” step that is required. For example, the NFO for Motilal Oswal’s 5 year G-SEC ETF is happening now, the units of the ETF will be listed on the markets after the NFO process is complete.

P.S- You’re not required to pay 13000 in each Nifty ETF, merely because the NIFTY is at 13000 today. Each ETF has a different ticket size, based on how many units the trust’s assets are divided into. For example, one unit of NIFTYBEES is benchmarked to 1/100th of the value of the NIFTY, so trades around Rs 130 per unit.

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ETF is apt for every investor if it is done for the long term. If you have enough time, you also hold a great percent of stock ETF for better growth. Also, if you want to invest safely in equities, it is suggested to invest in NIFTY BeES. This will give investors the same returns as the NIFTY Index gives. Whenever NIFTY rises, the invested money also rises or vice versa. ETF is a highly liquid investment.

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