An ETF or exchange-traded fund was introduced in 1993 as a basket of securities. These funds mirror the investment style of a popular index, such as Sensex and Nifty 50, and try to replicate the returns.
ETFs pool multiple investors' funds and invest them in tradable assets such as debt securities, bonds, shares, and derivatives.
These ETFs are registered with SEBI or the Securities and Exchange Board of India. Individuals can buy and sell ETFs on stock exchanges via a broker.
An interested investor can invest in multiple ETFs without any restrictions. Individuals looking to park their savings can easily invest during market hours. ETFs are highly liquid which allows investors to offload the units when necessary.
Individuals should have a clear understanding of ETF and their function to make an informed decision. In this regard, having an idea of the types of exchange-traded funds will be beneficial.