An ETF is a collection of securities that are traded on the stock exchange. These securities could be stocks, commodities, bonds or currencies. As they are listed on an exchange, ETFs trade like stocks and experience price changes as and when they are bought and sold. Assume a fund that has all the Sensex 30 stocks. Let’s call it the Sensex Fund. This fund, with its basket of 30 stocks, gives you the advantage of risk diversification. Trading in an ETF is just like buying or selling the Sensex Fund or any other Index Fund listed on the stock exchange. Since the Sensex Fund trades like a stock, its price fluctuates during market hours.
You can earn from your idle money with ETFs. They have the potential to beat long term returns from Savings Accounts and Fixed Deposits. Here’s how they compare:
Annual Returns (as on July 5 2023)
Savings Account
3-6%
Fixed Deposits
6-7.5%
Nifty 50
12.22%
In 3 years, investment of Rs. 100,000 would become
Savings Account
Rs. 109,273 (Assuming 3%)
Fixed Deposits
Rs. 119,102 (Assuming 6%)
Nifty 50
Rs. 1,41,298
Risk
Savings Account
Low
Fixed Deposits
Low
Nifty 50
Moderate
Investment Cost
Savings Account
No management costs
Fixed Deposits
No management costs
Nifty 50
Expense ratio of < 0.20% + Brokerage as per plan
Early Withdrawal
Savings Account
Allowed without any penalty
Fixed Deposits
Penalty on premature withdrawal
Nifty 50
Allowed without exit load. Only cost is Brokerage
Savings Account | Fixed Deposits | Nifty 50 | |
---|---|---|---|
Annual Returns (as on July 5 2023) | 3-6% | 6-7.5% | 12.22% |
In 3 years, investment of Rs. 100,000 would become | Rs. 109,273 (Assuming 3%) | Rs. 119,102 (Assuming 6%) | Rs. 1,41,298 |
Risk | Low | Low | Moderate |
Investment Cost | No management costs | No management costs | Expense ratio of < 0.20% + Brokerage as per plan |
Early Withdrawal | Allowed without any penalty | Penalty on premature withdrawal | Allowed without exit load. Only cost is Brokerage |
Assumptions:
Let the numbers speak for themselves! Here are the top 3 ETFs with 5 year returns:
Name
Motilal Oswal NASDAQ-100 ETF
5 year returns (As on 11th Sept 2023)
18.79%
Benchmark name
NASDAQ index
Name
Motilal Oswal Nifty Midcap 100 ETF
5 year returns (As on 11th Sept 2023)
16.62%
Benchmark name
Nifty Midcap 100
Name
Nippon India ETF Nifty 50 Value 20
5 year returns (As on 11th Sept 2023)
15.29%
Benchmark name
Nifty 50 Value 20
Name | 5 year returns (As on 11th Sept 2023) | Benchmark name |
---|---|---|
Motilal Oswal NASDAQ-100 ETF | 18.79% | NASDAQ index |
Motilal Oswal Nifty Midcap 100 ETF | 16.62% | Nifty Midcap 100 |
Nippon India ETF Nifty 50 Value 20 | 15.29% | Nifty 50 Value 20 |
Liquid ETF is a type of mutual fund which invests in very short-maturity debt securities.
Parameter
Risk
Savings Account
Lowest
Fixed Deposits
Lowest
Liquid ETF
Low
Parameter
Pre-tax returns
Savings Account
3-6%
Fixed Deposits
6-7.5%
Liquid ETF
5-6%
Parameter
Tax
Savings Account
No tax upto INR 10,000 interest as per income tax slab
Fixed Deposits
10% deducted at source
Liquid ETF
Same as debt mutual funds
Parameter | Savings Account | Fixed Deposits | Liquid ETF |
---|---|---|---|
Risk | Lowest | Lowest | Low |
Pre-tax returns | 3-6% | 6-7.5% | 5-6% |
Tax | No tax upto INR 10,000 interest as per income tax slab | 10% deducted at source | Same as debt mutual funds |
At Kotak Securities, we offer you access to trade in equity, debt, commodity and international Exchange-Traded Funds.
Check the list of ETFs here : https://www.kotaksecurities.com/exchange-traded-funds-etf/
Here’s how you can invest:
Source: www.amfiindia.com
DISCLAIMER: Past performance is not indicative of future results. Securities mentioned are exemplary and not recommendatory