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Investing

Exchange-Traded Fund (ETF)

A fund that holds a basket of securities, usually tracking an index, whose units trade on a stock exchange like a share.

Unlike a regular mutual fund that transacts once a day at its NAV, an ETF's price moves continuously through the trading day. You buy and sell ETF units through a broker, and you need a demat account to hold them.

ETFs often carry very low expense ratios, but trading them can involve a bid-ask spread and brokerage costs, so the cheapest headline fee is not the whole picture.

Key points

  • Trades on the exchange at live prices.
  • Requires a demat account to hold.
  • Very low fees, but watch the bid-ask spread.

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Related terms

Index Fund

A mutual fund that simply tracks a market index, such as the Nifty 50, rather than trying to beat it.

Demat Account

An account that holds your shares and other securities in electronic form, replacing old paper certificates.

Net Asset Value (NAV)

The per-unit value of a mutual fund, calculated as the total value of its holdings minus expenses, divided by the number of units outstanding.

Expense Ratio

The annual fee a mutual fund charges to manage your money, expressed as a percentage of your investment.