Here's How To Buy An ETF?

Mutual funds are the preferred choice for retail investors. However, they come at a cost and fund management risk, apart from other risks. A smarter alternative is to invest through ETFs.

- Kundan Kishore

ETFs have become very popular due to their flexibility, low costs, and ease of investing. There are over 225 ETFs (including 18 gold ETFs) offered by various fund houses.

These are traded on stock exchanges and can be bought and sold like shares at the prevailing market prices. They typically track an index, commodities, such as gold and silver, or a basket of securities (stocks of the underlying index).

On account of their unique structure, the difference between the market price and the underlying NAV is marginal. ETFs also boast of a lower tracking error.

One of the main advantages is their ability to offer diversification, as they allow investors to buy a collection of securities in a single transaction.