Etf
- 1. NAME : JAIN SONAL ROLL NO. : 26 (FIN) SUBJECT : STOCK EXCHANGE AND PORTFOLIO MANAGEMENT SUBMITED TO : MRUNAL SIR.
- 3. ETFs are mutual funds that trade like a stock Exchange Traded Fund (ETF) – Simplicity – Transparency – Risk control – Diversification – Open-End Fund Stock: – On Exchange – Trading flexibility – Trading strategies + MUTUAL FUND STOCK EXCHANGE TRADED FUND 3
- 4. 4 Redemption PRIMARY MARKET SECONDARY MARKET Authorized Participants & Large Investors ETF Issuer Buyer Exchange Seller Buy & Sell Market Making Arbitrage Creatio n Cash ETF Units Cash ETF Units * Creation & Redemption of ETF units is done only in integral multiples of creation units.
- 5. do not sell or redeem their individual shares at net asset value (NAV). Instead, financial institution purchase and redeem ETF shares directly from the ETF, but only in large blocks varying in size from 25,000 to 200,000 shares, called creation units. Purchases and redemptions of the creation units generally are in kind , with the institutional investor contributing or receiving a basket of securities of the same type and proportion held by the ETF
- 6. 6 Market Value or Fair Value of Schemes Investments Net Current Assets (including accrued expenses) + Number of Units Outstanding as on Valuation Date NAV (INR) =
- 7. Two primary features of an ETF’s structure promote trading of an ETF’s shares at a price that approximates the ETF’s underlying value: portfolio transparency the ability for authorized participants to create or redeem ETF shares at net asset value (NAV) at the end of each trading day.
- 8. Index ETF Commodity ETFs Liquid ETFs
- 9. Most ETFs are index funds that hold securities and attempt to replicate the performance of a stock market index. An index fund seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index.
- 10. Commodity ETFs invest in commodities, such as precious metals. first commodity ETFs were gold exchange-traded funds, which have been offered in a number of countries. The idea of a Gold ETF was first officially conceptualized by Benchmark Asset Management Company Private Ltd in India when they filed a proposal with the SEBI in May 2002.
- 11. Liquid ETFs are funds whose unit price is derived from Money market securities comprising of government bonds treasury bonds, call money market etc, ETFs are immediately tradable; therefore, the risk of price movement between investment decision and time of trade is substantially less when ETFs are used in lieu of traditional funds.
- 12. Buy and sell just like a share Buy and sell at real time prices Like an index fund, they are very transparent Cost Advantage : The only costs for an investor are brokerage commissions, management fees and taxes Minimum trading lot just one unit Provides Diversification Arbitrage in Future and Cash Market
- 13. They have to pay a brokerage (usually around 0.35% to .99% ). This is considered high for a new short term Investor. Advantages in Local ETF disappear in Foreign ETFs. Have to place a fresh order every month. You can't automatically re-invest your dividends.
- 14. Difference between Stocks, Mutual Funds & ETFs
- 15. ETFs V/S Stocks and Mutual Fund Functionality ETFs Stocks Mutual Funds Unit Can be purchase through NSE broker or online trading account Yes Yes No Ability to put limit orders Yes Yes No Real time trading and pricing throughout market hours Yes Yes No Returns at par with the market/index Yes No No
Editor's Notes
- #7: NAV: The NAV of each Scheme will be calculated upto four decimals. The NAV shall be calculated and announced on each working day. The NAV of the Scheme will be communicated to at least two newspapers on a daily basis. The same will also be displayed on the fund website Domestic price of gold = (London Bullion Market Association AM fixing in US$/ounce X Conversion factor for converting ounce into kg for 0.995 fineness X rate for US$ into INR) + Custom duty for import of gold + Sales Tax / octroi and other levies applicable. The currency fluctuations (represented as the conversion factor above) can significantly affect the value of Gold in domestic Indian Rupees terms, and thus the performance of gold ETF Note for Hang Seng BeES: Due to difference in time zones of different markets, in case the closing prices of Securities are not available within a given time frame to enable the AMC to upload the NAV for a valuation day, the AMC shall use the last available traded price for the purpose of valuation.