What is Exchange Traded Funds (ETF) and how to buy them?

ETF

Exchange traded funds are a little different from mutual funds as they are securities which can be traded at exchange like any other stock. While the price of any mutual fund is ascertained after looking at its net asset value (NAV) at the end of the trading day, the price of ETF keeps changing throughout the day as they are traded on the exchange.

How to buy ETF or how to invest in them

First of all, you need to have a trading account with a broker or a sub-broker. You will also need to have a demat account so that you can hold the ETF units. If you have these accounts, you can start trading in ETF but if you need to open these accounts than you need to be ready with these documents:

  • Identity proof: Aadhar, Passport, PAN
  • Address Proof: Aadhar, Passport, Utility bill
  • Bank Account Details: Statement of Bank Account

Once your account gets functional then you can:

  • Buy or sell ETF by placing an order on phone call to your broker/sub-broker, then your broker/sub-broker will place your order on the online terminal.
  • You can place your order yourself on the online terminal by using online facility.

You should make sure that your broker/sub-broker is registered with the stock exchange. ETFs offer a range of benefits such as lower transaction charges, tax benefits, diversification and easy management of portfolio.

Happy Trading.

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