What are Exchange Traded Funds or ETFs?

  Author: Kundan Kishore

Exchange Traded Funds (ETFs) are mutual funds that passively invest the money raised from investors in an underlying. This could be a stock or an index for stocks, gold or others. Without buying these underlying, these funds give you returns similar to the returns that the underlying generates. This means an ETF investing in a stock index will mirror the returns provided by the index, such as Sensex or Nifty in India.

In India, ETFs are popular in equity and gold. Equity ETFs can be a very good first step for anyone looking forward to making the first equity investment. This helps the investor benefit from the growth in the equity markets without the efforts and expertise is normally involved while investing in equities directly.

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