ETFs vs Index Funds

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Well, Index Fund is an Umbrella term. Index Funds replicates an underlying index, that’s why less workforce is needed and expense ratio is cheaper compared to actively managed funds. Actively managed funds always consider one index as a benchmark index and they just try to beat the performance of the index. And Index Funds try to track the index. And like other systems, this system is not also error free. We call em tracking error. More info regarding tracking error will be found in https://www.investopedia.com/terms/t/trackinger...
There are multiple types Index Funds. One kind are plain old vanilla mutual funds. Yes, there are many fund houses have Index Funds in their arsenal. One can subscribe them/invest in them by visiting the respective fund houses/mutual fund platforms like Groww, Kuber, Coin, Fundsindia etc/agents(these days advisors can’t sell and sellers can’t advise). Another kind comes in form of ETFs or so called Exchange Traded Funds. Index Fund ETFs can only be purchased if one has a Trading cum Demat account.

The term ETF is itself an umbrella term for its own niche segment. It includes Index ETFs ex NIFTYBEES, Commodity ETFs ex GOLDBEES, Actively managed ETFs (Sounds contradictory but yes they exist. https://www.investopedia.com/terms/a/actively-m...) but they don’t exist in India sadly but https://etfdb.com/themes/actively-managed...s/ will give a list of em. In India there are two kind of ETFs, IndexETFs and GoldETFs. Well that’s technically wrong, there are LIQUIDBEEs and LIQUIDETF by DSP (There is nothing liquid about it though, very low volume thing, stick to LIQUIDBEEs only), https://support.zerodha.com/tickets/20210310292...

Along with the ETFs shared above, there are couple of other noteworthy ETFs. Ex: LIQUIDBEES (again from Nippon India Mutual Fund, very liquid and it is called cash equivalent. 90% margin is given when pledged with just 10% haircut) https://support.zerodha.com/category/trading-an... is a very good article on it, SHARIABEES (Shariah compliant securities are listed only, derived from Nifty 50 index. Constituents are Infosys Ltd (26.88%), Tata Consultancy Services Ltd. (7.60%), Hindustan Unilever Ltd. (11.02%), Asian Paints Ltd. (5.94%), HCL Technologies Ltd. (5.71%), Titan Company Ltd. (3.40%), Nestle India Ltd. (3.32%), Tech Mahindra Ltd. (3.29%), Dr. Reddy’s Laboratories Ltd. (3.11%), Grasim Industries Ltd. (2.70%) https://www1.nseindia.com/content/indices/Facts... will give more detailed info. Warning very iliquid) etc.

Top ETFs with most volume as per today’s info (10th March 2021) are GOLDBEES (52,86,384), CPSEETF, NETFIT, NIFTYBEES, HDFCMFGETF, ICICIGOLD, LIQUIDBEES data collected from https://www.nseindia.com/market-data/exchange-t... (It changes everyday).

Pros and Cons of ETFs
Pros:
1) +ADD/EXIT in Market Hour: We can buy at market price. Index crashed. You need to invest. What to do? You buy ETFs of your choice. And some how we can anticipate a crash, what to do? We sell. In mutual funds there are a lot of obstacles. Ex: https://www.moneycontrol.com/news/business/npci...
2) +Immediately Reinvested Dividends
https://www.investopedia.com/articles/exchanget...
+Cons

1) +Brokerage, taxes and AMC BSDA guidelines allows BSDA (Basic Services DEMAT Account) holders to pay 0 as AMC if holding value lies below 50k INR, 100INR if holding value lies in between 50k and 2lakh INR. Above that threshold BSDA holder needs to pay AMC as per broker’s discretion(https://www.sebi.gov.in/media/press-releases/au...). In this aspect normal mutual funds become very efficient. Long term returns are almost comparable to ETF n non ETF Index Funds. If portfolio is in negatives, it just pains to pay taxes, brokerage and AMCs etc.
2) +Speculative Trades As the asset can be liquidated quite easily, one might not be able to contain ones’ emotion. That will incur losses.
3) +Necessity of having min two accounts so no BSDA benefits and more expenses One acc will be for speculative trading and other will be for investments. That’s okay for stock holding. I am not sure for investment in mutual funds.
4) +Brokerage House Defaults That’s like being on edge 24X7, which we avoided by being into mutual funds in the first place.
🙂🙂🙂🙂

Copied from my own comment on https://www.desidime.com/news/top-5-etfs-in-ind...

Deal Wiki

@pingpong bhai has the credit

31 Comments  |  
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Wonderful info, have recently started sip in niftybees and goldbees for a secure financial future

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bikidas2060 wrote:

@MJ911 @bumblefoot @MrKool_JJ @rini50 @vijkap201 @saucap @guest_999 @rajrocks @Ghilli @sravz86 @SHARKTANK @AyushiiiVijay @Wontdisplaymyname @Total_Fun @P_A_N_K_A_J @pingpong @goss8877 @beingsr @cocay @Alexios @garamjalebi @looter143 @rsai01 @Dastro @mas143forever @MSDfan @androgame @alienteck @amdoinggood123 @drupal @Nationalist

Kahin pada tha biki bhai ki…
.
Sukhmay jeevan ke liye GOLDETF khareeday biwi ko bata kar aur bache chupke se bina bataye… smile toungueout

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vijkap201 wrote:

Kahin pada tha biki bhai ki…
.
Sukhmay jeevan ke liye GOLDETF khareeday biwi ko bata kar aur bache chupke se bina bataye… smile toungueout

Bhauuuu, kya likha re. Jail ho jaegi faaltu me hame pensive pensive pensive

Aap hamare sense of humour masterji baniye.

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bikidas2060 wrote:

@MJ911 @bumblefoot @MrKool_JJ @rini50 @vijkap201 @saucap @guest_999 @rajrocks @Ghilli @sravz86 @SHARKTANK @AyushiiiVijay @Wontdisplaymyname @Total_Fun @P_A_N_K_A_J @pingpong @goss8877 @beingsr @cocay @Alexios @garamjalebi @looter143 @rsai01 @Dastro @mas143forever @MSDfan @androgame @alienteck @amdoinggood123 @drupal @Nationalist

V Interesting. +🔥 and ✝️ Karma given

U know bro there are even active Index funds 😖https://www.investopedia.com/terms/a/active_index_fu...sp
Completely contradictory. Almost like an oxymoron. 🤷🏼‍♂️

Now with all this financial innovation, most important is to check technicality details second.. and first check:
a) expense ratio
b) tracking error and
c) liquidity 🙂

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epf money worth crores is invested every month in sbietf so blindly go for it if u have 5 yrs horizon . more returns than fd and safety too.

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epf money worth crores is invested every month in sbietf so blindly go for it if u have 5 yrs horizon . more returns than fd and safety too.

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biki sir long term mein kya etf index fund ko beat karta ha

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pingpong wrote:

V Interesting. +🔥 and ✝️ Karma given

U know bro there are even active Index funds 😖https://www.investopedia.com/terms/a/active_index_fu...sp
Completely contradictory. Almost like an oxymoron. 🤷🏼‍♂️

Now with all this financial innovation, most important is to check technicality details second.. and first check:
a) expense ratio
b) tracking error and
c) liquidity 🙂

I didn’t know about active index funds 😁😁😁 seriously man, that’s weird.

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kishwar5bsw wrote:

epf money worth crores is invested every month in sbietf so blindly go for it if u have 5 yrs horizon . more returns than fd and safety too.

Brother, it’s not like that. All index funds gonna track their benchmark index, so you know.

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kukdookoo wrote:

biki sir long term mein kya etf index fund ko beat karta ha

Bhai, both ETF index fund and plain vanilla index mutual fund track their respective indices. In the long run they should give almost identical performance, with the exception of broker amc, brokerage gonna drag ETFs down a bit.

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bikidas2060 wrote:

Bhai, both ETF index fund and plain vanilla index mutual fund track their respective indices. In the long run they should give almost identical performance, with the exception of broker amc, brokerage gonna drag ETFs down a bit.

Great info as always @bikidas2060

How about doing SIPs in ETF ( NiftyBees / GoldBees / BankBees etc. ) and if there is 5-10% correction invest additional amount … this way we may beat the index funds benchmarks?

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3) +Necessity of having min two accounts so no BSDA benefits and more expenses One acc will be for speculative trading and other will be for investments. That’s okay for stock holding. I am not sure for investment in mutual funds.

Didn’t get about this. You mean to say we can have 2 DMAT accounts. one to satisfy BSDA other for high value transactions

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xuseronline wrote:

Great info as always @bikidas2060

How about doing SIPs in ETF ( NiftyBees / GoldBees / BankBees etc. ) and if there is 5-10% correction invest additional amount … this way we may beat the index funds benchmarks?

Acha bhai, both gonna track indices. ETFs will offer liquidity and allow investments at market prices. In long run index funds will have an upper hand because ETFs will reside in demat account, and we have to rely on that broker with eyes closed. So, I am skeptical about it..

I have a doubt. I read that Niftybees’ expense ratio is 0.8%. But we buy that from secondary market. If I buy em, it will reside in my demat account. So, how do they deduct that expense ratio from the NAV?

@pingpong @guest_999 @admin @bumblefoot @drupal @BubbleBoyChickenLittle @drjpatwa

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kishwar5bsw wrote:

epf money worth crores is invested every month in sbietf so blindly go for it if u have 5 yrs horizon . more returns than fd and safety too.

can u share link

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BaMbU wrote:

3) +Necessity of having min two accounts so no BSDA benefits and more expenses One acc will be for speculative trading and other will be for investments. That’s okay for stock holding. I am not sure for investment in mutual funds.

Didn’t get about this. You mean to say we can have 2 DMAT accounts. one to satisfy BSDA other for high value transactions

@bikidas2060 i m.also confused pls help

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Novizio wrote:

@bikidas2060 i m.also confused pls help

In the end, our investment value ll be above 2 lakh upper cap. So, BSDA benefits might be handy in initial years.

BSDA benefits can be availed in only one account. Multiple account holders are not eligible.

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BaMbU wrote:

3) +Necessity of having min two accounts so no BSDA benefits and more expenses One acc will be for speculative trading and other will be for investments. That’s okay for stock holding. I am not sure for investment in mutual funds.

Didn’t get about this. You mean to say we can have 2 DMAT accounts. one to satisfy BSDA other for high value transactions

One for trading and one for investment. Never mix trading with investment. 🙂🙂🙂

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bikidas2060 wrote:

In the end, our investment value ll be above 2 lakh upper cap. So, BSDA benefits might be handy in initial years.

BSDA benefits can be availed in only one account. Multiple account holders are not eligible.

to hme ek different account rkhna chahiy etf sip k lie…NON BSDA ??

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Novizio wrote:

to hme ek different account rkhna chahiy etf sip k lie…NON BSDA ??

Different account rakhenge toh wo bsda hoga hi nai bhai. 🙂🙂🙂

Missing