Published on: December 3, 2024
When it comes to stock trading, many investors are well-versed in identifying and investing in companies with strong fundamentals or technical setups. However, when it comes to ETFs (Exchange-Traded Funds), awareness tends to be limited. This blog aims to shed light on ETFs, their significance, and the types of ETFs you can trade through your Definedge Securities Super Demat.
What is an ETF?
An ETF is a marketable security that tracks an index, commodity, sector, or other asset but trades on an exchange like a stock. It combines the features of stocks and mutual funds, offering investors the flexibility of stock trading and the diversification of mutual funds.
Let us break down ETFs further by comparing them with stocks and mutual funds.
ETF vs. Stocks
- Diversification: Stocks represent ownership in a single company, whereas an ETF allows investors to diversify across multiple stocks within a sector, index, or asset class.
- Risk: Stocks are subject to company-specific risks, while ETFs spread risk across the portfolio they track.
- Trading Flexibility: Like stocks, ETFs can be traded on exchanges throughout the day, making them more liquid and accessible.
ETF vs. Mutual Funds
- Liquidity: Mutual funds are bought or sold at the NAV of the closing price of the trading day, while ETFs trade throughout the day like stocks.
- Fees: ETFs generally have lower management fees than mutual funds, which often have higher expense ratios and entry/exit loads.
- Transparency: ETFs disclose their holdings daily, whereas mutual funds do so quarterly.
- Minimum Investment: Unlike some mutual funds, ETFs don’t have minimum investment requirements.
Types of ETFs on the Definedge Platform
Definedge provides access to a wide range of ETFs to cater to investor’s diverse needs. As of November 30, 2024, approximately 115 liquid ETFs are available on the platform, carefully curated based on volume and value traded. This list is updated monthly to ensure relevance and safeguard investors.
Here are the key categories of ETFs available:
1. Multi-Sector ETFs
These ETFs track benchmark indices like Nifty50, Sensex, or Nifty500, offering exposure to multiple sectors. They are ideal for investors seeking diversified equity market exposure.
2. Sector-Specific ETFs
Sectoral ETFs allow investors to focus on specific industries such as:
- Banking
- Infrastructure
- Pharma
- Healthcare
- IT
- Auto
- BFSI
The list may go on, but these ETFs are useful for investors who have a strong outlook on a particular sector’s performance.
3. Momentum ETFs
Momentum ETFs comprise stocks that exhibit strong upward trends. They typically include stocks from indices like Nifty50, Nifty100, or Nifty200 that are outperforming their peers.
4. Volatility ETFs
Volatility ETFs focus on stocks with high or low volatility, such as those in indices like the Nifty50, Nifty200, or Nifty500. These are suitable for investors who want to benefit from price swings or seek stability.
5. International Index ETFs
For those looking to diversify globally, Definedge offers ETFs tracking international indices such as:
- S&P 500
- Nasdaq
- Hang Seng
These provide exposure to foreign markets and help mitigate domestic market risks.
6. Commodity-Based ETFs
Commodity ETFs track the performance of physical commodities like gold and silver. These are popular among investors seeking a hedge against inflation or market downturns.
7. Government Bond ETFs
Government Securities (G-Sec) ETFs invest in government bonds, offering a safe and stable return. These are ideal for risk-averse investors or those seeking fixed-income options. For example – LTGILTBEES,
Understanding ETF Issuers
ETF issuers are professional financial institutions that create and manage ETFs. Common issuers include reputed entities like SBI Mutual Fund, Nippon India, HDFC, ICICI Prudential, and Aditya Birla. Each issuer specialises in different themes and sectors, offering tailored investment solutions to meet various investor needs.
Here is the list of the ETFs sorted as per issuer.
Why Trade ETFs with Definedge?
Definedge offers a seamless platform for ETF trading with tools designed to simplify your decision-making:
- Access to Liquid ETFs: Only the most actively traded ETFs are listed to ensure better liquidity and pricing.
- Monthly Updates: Regularly updated ETF lists help you stay informed and make timely decisions.
- Research and Analysis Tools: Leverage Definedge’s platforms to analyse ETFs and craft strategies that align with your investment goals.
ETF Research with Definedge
With RZone and TradePoint platforms, you can dive deep into ETF research using a variety of advanced chart patterns and technical analysis tools. These platforms enable you to identify trends, patterns, and key levels precisely. Additionally, RZone empowers you to create customised scanners and trading systems, allowing you to filter ETFs based on criteria like volume, momentum, or volatility, ensuring that your strategies are tailored to your unique investment goals.
Are you ready to invest in ETFs?
