Exchange Traded Funds

What Is An ETF?

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. This is unlike a mutual fund, whose NAV, or price, is calculated at the end of the day.

Returns Comparison Between ETFs And FD & Savings Account

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: Savings account 3-6% FDs: 6-7.5%Nifty 50: 15.73%*

• In 3 years, investment of Rs. 100,000 would become: Savings account: Rs. 109,273 (Assuming 3%) FD: Rs. 119,102 (Assuming 6%) Nifty 50: Rs.1,55,002

• Risk: Savings account: Low FD: Low Nifty 50: Moderate

• Investment cost: Savings account: No management costs FD: No management costs Nifty 50: Moderate: Expense ratio of < 0.20%^ + Brokerage of < 0.40%

• Early withdrawal: Savings account: Allowed without any penalty FD: Penalty on premature withdrawal Nifty 50: Allowed without exit load^. Only cost is Brokerage

source: https://www.amfiindia.com

^ For ETF based in index such as NIFTY

^^ Assuming return of 3% (Savings A/C), 6% (FD), 15.73% (Nifty 50). Taxation not considered.

** Basis Kotak Securities current delivery brokerage rate

• Nifty 3 year average return as of 2nd December 2019. Past performance is not indicative of future results.

Top Performing ETFs

Let the numbers speak for themselves! Here are the top 3 NIFTY-benchmarked ETFs *** with regular 3 year returns:

• Edelweiss Exchange Traded Fund-Nifty 50 – 16.15%
• UTI Nifty Exchange Traded Fund – 15.71%
• SBI ETF Nifty 50 – 15.68%

The 3-year benchmark return for the ETFs above is 15.73%

source: https://www.amfiindia.com

** Past performance is not indicative of future results.

Securities mentioned are exemplary and not recommendatory

How Liquid ETFs Perform In Comparison To Savings Account And FD?

• Risk Savings account: Lowest FD: Lowest Liquid ETF: Low

• Pre-tax rate of return Savings account: 3%-6% FD: 6%-7.5% Liquid ETF: 5.15%#

• Tax payment Savings account: To be paid by the investor FD: To be paid by the investor Liquid ETF: Not taxable in the hands of the investor

• Liquid ETFs with their 1-year return DSP Liquid ETF - 5.62%# ICICI Prudential Liquid ETF - 5.35%# Nippon India ETF Liquid BeES - 4.46%*#

• Nifty 50: Allowed without exit load^. Only cost is Brokerage ^ For ETF based on index such as NIFTY ^^ Assuming return of 3% (Savings A/C), 6% (FD), 14.16% (Nifty 50). Taxation not considered. ** Basis Kotak Securities current delivery brokerage rate

• Nifty 3 year average return as of 26th November 2019 (3 Year CAGR). Past performance is not indicative of future results. #1 yr return as on 27th Nov, 2019 – average of ICICI Pru Liquid ETF, DSP Liquid ETF and Nippon India Liquid BeES ***Past performance is not indicative of future results. Securities mentioned are exemplary and not recommendatory *#Scheme related information as on 27th Nov, 2019;

What Are The Benefits?

• ETFs based on broad market indices provide diversification to your investments.
• Buy and sell at a real time price.
• Ideal for retail investors as the minimum lot size to trade is one unit on the secondary market.
• Low expense ratios as one would not be paying entry and exit loads and management fees.
• Trading of ETFs on exchange provides flexibility and liquidity to your investments.
• Exchange-Traded Funds tend to replicate the performance of the underlying with least error ratio.
• ETF holdings are readily disclosed, making your investment highly transparent.
• Quick and convenient dealing through demat accounts.
• Offers the risk diversification of a mutual fund.

What Does Kotak Securities Offer? At Kotak Securities, we offer you access to trade in gold, index, sector-specific as well as international Exchange-Traded Funds. Here’s how you can invest:

• Call your dealer and place the order over the recorded phone line
• Login to www.kotaksecurities.com > Trading > Place Order> Bonds & ETFs.
• Call 30305757 to place an order through Call and Trade.
• Invest through your mobile using our Kotak Stock Trader (KST) application.