Understand ETFs: Why and How to Invest, List of 201 ETFs

For beginners in stock trading, You are also required to learn about Exchange-Traded Funds (ETFs) as they combine stock trading flexibility with mutual fund benefits, offering diversified portfolios with lower costs and greater transparency.

It’s like investing in mutual funds but directly through the stock market; hence, it’s called Exchange Traded Funds (ETF).

There is no lock-in period, that helps you invest regularly by buying ETFs every month (similarly as SIP). The main task is to find well-performing ETFs. In this post, I will guide you from understanding the concept of ETFs to buying them.

What is an Exchange-Traded Funds (ETF)?

Do you know? An ETF is a type of investment fund that is traded on stock exchanges, much like individual stocks. ETFs hold assets such as stocks, commodities, or bonds and generally operate with an arbitrage mechanism designed to keep trading close to its net asset value. Most ETFs track an index, such as the Nifty 50 in India, providing investors with broad market exposure.

For example: You want to invest in the Auto sector instead of buying a single stock and researching it before buying, you can try ETF Auto where you invest in the auto sector of India and invest in multiple stocks through ETF.

Why Invest in ETFs?

1. Diversification: ETFs allow investors to buy a basket of securities in one transaction, reducing the risk associated with investing in individual stocks.
2. Cost-Effectiveness: ETFs typically have lower expense ratios compared to mutual funds because they are passively managed and aim to replicate the performance of an index.
3. Liquidity: You can buy and sell ETFs on stock exchanges throughout the trading day at market prices, making them highly liquid.
4. Transparency: You can get clear visibility into your ETFs holdings, which are usually disclosed daily and know the sector wise returns instead of depending the performance of one stock.
5. Less effect of market volatility: you no need to depend on performance of one stock. You invest in multiple stocks through ETFs. If one stock is not performing other stocks can take care of it.

How to Buy ETFs

1. Open a Brokerage Account: To trade ETFs, you need a brokerage account. Many online brokers in India, like Zerodha, Upstox, and Groww, offer easy account opening processes.
2. Research and Select an ETF: Choose an ETF based on your investment goals. Popular ETFs in India include those tracking the Nifty 50 or Sensex.
3. Place an Order: Just like stocks, you can place a market order or a limit order to buy ETFs. Monitor your investment through your brokerage platform.

Now, simply enter the “ETF Auto”, “ETF Gold” or “ETF Nifty” in your brokerage app to find out the available ETF and directly buy from there. Here I have attached the screenshots from the Zerodha Application (which I use) where I have searched the ETF on stock exchange and invest in it.

History of performance of ETFs

To check their historical performance, you can visit NSE india website (click here) 

You can observe the performance of ETFs through their historical returns. For example, the Nifty 50 index, which many ETFs track, has shown considerable growth over the years. Here’s a glimpse of its historical performance:

• 1 Year: Approximately 15%
• 5 Years: Approximately 70%
• 10 Years: Approximately 150%

These returns show the potential growth an investor can achieve by holding an ETF that tracks a major index such as the Nifty 50.

Examples of Popular ETFs in India

1. SBI ETF Nifty 50: One of the most widely traded ETFs, offering exposure to the Nifty 50 index.
2. ICICI Prudential Nifty ETF: Another popular option tracking the Nifty 50, known for its low cost.
3. Motilal Oswal NASDAQ 100 ETF: Provides exposure to the U.S. technology sector by tracking the NASDAQ 100.
4. GoldBees: It is also one of the popular ETF where you can invest in Gold and enjoy the returns of increasing gold value.
5. NIFTY NEXT 50: It is also a popular Exchange traded Fund (ETF) that includes next 50 stocks and the returns on your investment depend on the performance of nifty’s next 50 stocks combined.

List of Top 201 ETFs in India

Here is a list of 201 ETFs with their symbols. You can use these to search on broker websites or apps and invest in them for the long term.

Conclusion

ETFs are great for both new and experienced investors. They offer a simple way to invest in different types of assets and can be traded like stocks. By knowing how ETFs work and using their benefits, investors can create a strong investment portfolio that fits their financial goals.

If you are an Intraday trader, I will share a trading strategy which can be implemented by investing in ETF and hedging your intraday trading. So, do follow  Learn 5 Mistakes New Intraday Traders Make (How to Avoid Them)