{"id":78082,"date":"2026-10-28T17:46:40","date_gmt":"2026-10-28T12:16:40","guid":{"rendered":"https:\/\/www.5paisa.com\/finschool\/?post_type=markets&#038;p=78082"},"modified":"2026-10-28T17:50:35","modified_gmt":"2026-10-28T12:20:35","slug":"exchange-traded-funds","status":"publish","type":"markets","link":"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/exchange-traded-funds\/","title":{"rendered":"Exchange Traded Funds"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"78082\" class=\"elementor elementor-78082\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-4be72f6 elementor-section-full_width tab_container elementor-section-height-default elementor-section-height-default\" data-id=\"4be72f6\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-d209c0c\" data-id=\"d209c0c\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-inner-section elementor-element elementor-element-896d102 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"896d102\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-wide\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-inner-column elementor-element elementor-element-c9133f2 chapters_list\" data-id=\"c9133f2\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-aa101bd elementor-widget elementor-widget-shortcode\" data-id=\"aa101bd\" data-element_type=\"widget\" data-widget_type=\"shortcode.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"elementor-shortcode\">\t<script>\n\t\tjQuery(document).ready(function(){\n\t\t\tjQuery(\"#post_chapters a[href*='\" + location.pathname + \"']\")\n\t\t\t\t.addClass(\"current\")\n\t\t\t\t.attr(\"aria-current\", \"page\");\n\t\t})\n\t<\/script>\n\t<div class=\"desktop_chapters\"><div id=\"post_chapters\"><div class=\"post_chapters-heading\">Chapters<\/div><ul><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/background-and-orientation\/\">Background and Orientation<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-math\/\">Personal Finance Math<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/money-today-vs-money-tommorrow\/\">Money Today vs Money Tommorrow<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/the-retirement-part-1\/\">The Retirement -Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/assumptions-in-retirement-planning\/\">Assumptions in Retirement Planning<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/understanding-stock-funds\/\">The Role of Mutual Funds in Modern Finance<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/concept-of-fund-and-nav\/\">Concept of Fund and NAV<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/understanding-the-performance-of-your-fund\/\">Mutual Fund Factsheet<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/the-equity-scheme\/\"> The Equity Scheme<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/know-your-fund-manager\/\">Equity Scheme Part 2<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/debt-funds-part-1\/\">Debt Funds Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/monitoring-your-portfolio\/\">Debt Funds Part 2<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-myths\/\">Debt Funds Part 3<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/debt-funds-part-4\/\">Debt Funds Part 4<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/investing-in-bonds\/\">Investing in Bonds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/index-funds\/\">Index Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/arbitrage-funds\/\">Arbitrage Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/measuring-mutual-fund-returns\/\">Measuring Mutual Fund Returns<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/rolling-returns\/\">Rolling Returns<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-expense-ratio\/\">Mutual Fund Expense Ratio<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-benchmarking\/\">Mutual Fund Benchmarking<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-beta-sd-and-sharpe-ratio\/\">Mutual Fund Beta SD and Sharpe Ratio<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/sortino-and-capture-ratios\/\">Sortino and Capture Ratios<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/how-to-analyse-equity-mutual-funds\/\">How to Analyse Equity Mutual Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/how-to-analyse-debt-mutual-fund\/\">How to Analyse Debt Mutual Fund<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-portfolio\/\">Mutual Fund Portfolio<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/smart-beta-funds\/\">Smart Beta Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/asset-allocation\/\">Asset Allocation<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/exchange-traded-funds\/\">Exchange Traded Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/basics-of-macro-economics\/\">Basics of Macro Economics<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-part-1\/\">Personal Finance-Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-review-part-2\/\">Personal Finance Review Part 2 <\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/know-your-funds\/\">Know Your Funds<\/a><\/li><\/ul><\/div><\/div><div class=\"chapters_toggle\"><a href=\"#\" id=\"open_chapters\" aria-label=\"View chapters\"><span>View Chapters<\/span>&nbsp;&nbsp;&nbsp;<i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i><\/a><a href=\"#\" id=\"close_chapters\" style=\"display:none;\" aria-label=\"Hide chapters\"><span>Hide Chapters<\/span>&nbsp;&nbsp;&nbsp;<i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i><\/a><\/div>\t<script>\n\t\tjQuery(document).ready(function(){\n\t\t\tjQuery('.chapters_toggle #open_chapters').click(function(e){\n\t\t\t\te.preventDefault();\n\t\t\t\tjQuery('.desktop_chapters').removeAttr('hidden').css('left', '0px');\n\t\t\t\tjQuery('#open_chapters').css('display', 'none');\n\t\t\t\tjQuery('#close_chapters').css('display', 'block').focus();\n\t\t\t});\n\n\t\t\tjQuery('.chapters_toggle #close_chapters').click(function(e){\n\t\t\t\te.preventDefault();\n\t\t\t\tjQuery('.desktop_chapters').css('left', '-480px').attr('hidden', '');\n\t\t\t\tjQuery('#open_chapters').css('display', 'block');\n\t\t\t\tjQuery('#close_chapters').css('display', 'none');\n\t\t\t\tjQuery('#open_chapters').focus();\n\t\t\t});\n\t\t});\n\t<\/script>\n\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-inner-column elementor-element elementor-element-50ea166 tabs_contents\" data-id=\"50ea166\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-1e1f2ae market_content_tabs elementor-widget elementor-widget-eael-adv-tabs\" data-id=\"1e1f2ae\" data-element_type=\"widget\" data-widget_type=\"eael-adv-tabs.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t        <div data-scroll-on-click=\"no\" data-scroll-speed=\"300\" id=\"eael-advance-tabs-1e1f2ae\" class=\"eael-advance-tabs eael-tabs-horizontal eael-tab-auto-active \" data-tabid=\"1e1f2ae\">\n            <div class=\"eael-tabs-nav \">\n                <ul class=\"eael-tab-inline-icon\" role=\"tablist\">\n                                            <li id=\"study\" class=\"active-default eael-tab-item-trigger eael-tab-nav-item\" aria-selected=\"true\" data-tab=\"1\" role=\"tab\" tabindex=\"0\" aria-controls=\"study-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"far fa-edit\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Study<\/span>                            \n                                                    <\/li>\n                                            <li id=\"slides\" class=\" eael-tab-item-trigger eael-tab-nav-item\" aria-selected=\"false\" data-tab=\"2\" role=\"tab\" tabindex=\"-1\" aria-controls=\"slides-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"fas fa-book-open\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Slides<\/span>                            \n                                                    <\/li>\n                                            <li id=\"videos\" class=\" eael-tab-item-trigger eael-tab-nav-item\" aria-selected=\"false\" data-tab=\"3\" role=\"tab\" tabindex=\"-1\" aria-controls=\"videos-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"far fa-eye\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Videos<\/span>                            \n                                                    <\/li>\n                    \n                                  <\/ul>\n            <\/div>\n            \n            <div class=\"eael-tabs-content\">\n\t\t        \n                    <div id=\"study-tab\" class=\"clearfix eael-tab-content-item active-default\" data-title-link=\"study-tab\">\n\t\t\t\t        <p><div class='white' style='background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;'>\n<div id='text_slider' class='owl-carousel sa_owl_theme owl-pagination-true' data-slider-id='text_slider' style='visibility: visible;visibility:visible;'>\n<div id='text_slider_slide01' class='sa_hover_container' data-hash='Introduction-to-ETFs' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.1 \u2013 Introduction to ETFs<\/b><\/strong><\/h2>\r\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-78026 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs.png\" alt=\"Introduction to ETFs\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Imagine you invest in a mutual fund today. Your money is pooled with thousands of others, and at the end of the day the fund house calculates the value of all holdings, divides it by the number of units, and declares the NAV. You only know your purchase price that evening, when the NAV is published (by 11 pm). Now contrast that with buying shares of Infosys or Reliance\u2014you see the price instantly, and you can buy or sell at any moment during market hours.<\/p>\r\n<p>Exchange Traded Funds (ETFs) combine these two worlds. They are baskets of securities like mutual funds, but they trade on the stock exchange in real time like shares. This means you can react immediately to market movements, rather than waiting for end of day NAVs. For example, if you believe banking stocks will rally after a policy announcement, you can buy a Bank ETF at 11:05 AM and sell it at 3:15 PM the same day, before the market closes at 3:30 PM. That flexibility is the defining feature of ETFs.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide02' class='sa_hover_container' data-hash='The-Evolution-of-ETFs' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.2 \u2013 The Evolution of ETFs<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-78027 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF.png\" alt=\"The Evolution of ETF\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Mutual funds have a century-long history. The first modern open-ended fund in the US dates back to 1924, while India\u2019s journey began in 1964 with the Unit Trust of India. ETFs, however, are a much younger innovation. The first widely recognized ETF, the SPDR S&amp;P 500 (ticker: SPY), launched in 1993, and today it is one of the most heavily traded securities globally.<\/p>\r\n<p>India entered the ETF space with Nifty BeES, which tracks the Nifty 50 index; it was launched in December 2001 and listed in January 2002. Over time, ownership changed hands\u2014from Benchmark AMC to Goldman Sachs, then Reliance, and now Nippon India Mutual Fund. This journey reflects how ETFs have grown from niche products into mainstream instruments worldwide.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide03' class='sa_hover_container' data-hash='ETFs-in-the-Indian-Context' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.3 \u2013 ETFs in the Indian Context<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-78028 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context.png\" alt=\"ETFs in Indian Context\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Despite being available for over two decades, ETFs in India are still dominated by institutional investors rather than retail participants. For instance, the SBI Nifty 50 ETF has assets of over \u20b92 lakh crore (October 2026), largely because the Employees\u2019 Provident Fund Organisation (EPFO) invests heavily in it. Similarly, government divestment programs like CPSE ETF and Bharat 22 ETF have boosted ETF assets, but again, retail investors form only a small fraction.<\/p>\r\n<p>One reason for limited retail adoption is accessibility. Unlike mutual funds, which can be bought directly through apps or distributors, ETFs require a demat account and stock market familiarity. Another reason is incentives\u2014mutual funds pay distributors commissions, so they are actively marketed. ETFs, with thinner margins, don\u2019t get the same push. As a result, while ETFs are growing steadily, they remain underpenetrated compared to mutual funds.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide04' class='sa_hover_container' data-hash='What-Exactly-is-an-ETF?' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.4 \u2013 What Exactly is an ETF?<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78029 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF-.png\" alt=\"What exactly is an ETF\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF-.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Think of an ETF as a \u201cwrapper\u201d holding a portfolio of securities. If you buy a Nifty 50 ETF, you are indirectly owning all 50 companies in the index in the same proportion. The difference from mutual funds is immediacy\u2014you can buy or sell ETF units on the exchange at any time during trading hours.<\/p>\r\n<p>For example, if you search for \u201cNifty ETF\u201d on your broker\u2019s platform, you\u2019ll see multiple options from different fund houses, all tracking the same index. The choice then depends on liquidity, expense ratio, and tracking accuracy.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide05' class='sa_hover_container' data-hash='How-ETFs-Operate' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.5 \u2013 How ETFs Operate<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78030 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate.png\" alt=\"How ETFs Operate\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Mutual funds interact directly with investors\u2014when you invest, the AMC buys securities and later redeems them when you exit. ETFs, however, mostly bypass the AMC. Transactions happen between buyers and sellers on the exchange. If you sell your ETF units, another investor buys them; the AMC isn\u2019t involved in day to day trading. This makes ETFs more market-driven and dependent on liquidity.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide06' class='sa_hover_container' data-hash='Creation-and-Redemption-Mechanism' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.6 \u2013 Creation and Redemption Mechanism<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78031 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption.png\" alt=\"Creation and Redemption\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Here\u2019s where ETFs get interesting. Large investors or market makers can directly create or redeem ETF units with the AMC in bulk, known as \u201ccreation units.\u201d Creation units are large blocks, typically tens of thousands of units worth \u20b91 crore or more, and SEBI permits investors other than market makers to deal directly with the AMC only for transactions above \u20b925 crore. Institutions can deliver the underlying basket of Nifty stocks to the AMC, receive ETF units, and then sell them on the exchange.<\/p>\r\n<p>This mechanism ensures liquidity and keeps ETF prices aligned with their NAV. If ETFs trade at a premium, market makers create units at NAV and sell them at higher market prices, profiting while correcting the imbalance. If they trade at a discount, they buy ETF units cheaply, redeem them with the AMC for underlying shares, and sell those shares in the market. This arbitrage keeps ETFs close to fair value.<\/p>\r\n<p>A striking example was the Motilal Oswal NASDAQ 100 ETF, which at times traded at premiums of around 20% when fresh unit creation was constrained (including by the overseas investment limits on Indian mutual funds) and market makers could not arbitrage the gap. Once creation resumed and liquidity providers stepped in, the gap narrowed, showing how crucial this mechanism is.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide07' class='sa_hover_container' data-hash='Understanding-ETF-Liquidity' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.7 \u2013 Understanding ETF Liquidity<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78032 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity.png\" alt=\"ETF Liquidity\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Liquidity in ETFs isn\u2019t just about daily trading volumes or AUM. There are multiple layers:<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>Secondary market liquidity<\/b><\/strong>\u2013 What you see on your trading screen, i.e., bid-ask spreads and volumes.<\/li>\r\n<li><b><\/b><strong><b>Market depth<\/b><\/strong>\u2013 The hidden liquidity provided by market makers, who stand ready to buy or sell large quantities.<\/li>\r\n<li><b><\/b><strong><b>Primary market liquidity<\/b><\/strong>\u2013 Institutions can always create new units directly with the AMC.<\/li>\r\n<li><b><\/b><strong><b>Underlying stock liquidity<\/b><\/strong>\u2013 Ultimately, an ETF is only as liquid as the securities it holds.<\/li>\r\n<\/ol>\r\n<p>For example, India had no small-cap ETFs for many years\u00a0 because small-cap stocks often hit upper or lower circuits and lack sufficient liquidity. A sudden surge in demand can make it very hard for market makers to create units, leading to distorted premiums. In contrast, large-cap ETFs like Nifty 50 ETFs remain liquid because their underlying stocks are actively traded.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide08' class='sa_hover_container' data-hash='Types-of-ETFs-in-India' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.8 \u2013 Types of ETFs in India<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78033 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India.png\" alt=\"Types of ETFs in India\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>India now offers more than 200 ETFs, and industry ETF assets crossed \u20b910 lakh crore in October 2025. They are mostly equity-based. Broadly, they fall into three categories:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Equity ETFs<\/b><\/strong>\u2013 These include plain vanilla index trackers like Nifty 50 or Sensex, as well as smart beta ETFs that focus on factors like low volatility or momentum.<\/li>\r\n<li><b><\/b><strong><b>Debt ETFs<\/b><\/strong>\u2013 Examples include Bharat Bond ETFs, which invest in PSU bonds, and G-sec ETFs.<\/li>\r\n<li><b><\/b><strong><b>Commodity ETFs<\/b><\/strong>\u2013 Gold ETFs dominate this space, followed by silver ETFs\u00a0<\/li>\r\n<\/ul>\r\n<p>While most ETFs are passive, tracking indices, smart beta ETFs blur the line by applying rules-based strategies. Globally, active ETFs are emerging, and India may eventually see them too.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide09' class='sa_hover_container' data-hash='ETFs-vs-Index-Funds' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.9 \u2013 ETFs vs Index Funds<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78034 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds.png\" alt=\"ETFs vs Index Funds\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Both ETFs and index funds aim to replicate an index, but they differ in mechanics. Index funds are priced once daily at NAV, while ETFs trade in real time. This makes ETFs more flexible for tactical strategies, like buying during intraday dips.<\/p>\r\n<p>However, ETFs come with bid-ask spreads and brokerage charges, while index funds are simpler\u2014no trading costs, easy SIP setup, and no liquidity concerns. For a long-term passive investor, index funds may be easier. For someone who wants flexibility and intraday control, ETFs are better.<\/p>\r\n<p>For example, if you want to systematically invest \u20b95,000 every month without worrying about timing, an index fund works well. But if you want to quickly exit during a market rally, ETFs give you that option.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide10' class='sa_hover_container' data-hash=' ETFs-vs-Actively-Managed-Funds' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.10 \u2013 ETFs vs Actively Managed Funds<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78035 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds.png\" alt=\"ETFs vs Active Funds\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Globally, studies show that most actively managed funds fail to beat their benchmarks. In the US, nearly 90% of active funds underperform over long periods. In India too, SPIVA reports reveal that more than 70% of large-cap funds lag behind indices like Nifty 50.<\/p>\r\n<p>The main reason is cost. Active funds charge around 1.5% annually, while index funds or ETFs tracking Nifty 50 may cost just 0.1%. Over time, this difference compounds significantly. For instance, if two funds both earn 12% gross returns, the active fund investor may only see 10.5% after costs, while the ETF investor enjoys 11.9%.<\/p>\r\n<p>Even in mid-caps, where active managers were once thought to have an edge, many funds now struggle to beat benchmarks like Nifty Midcap 150. The market has become more efficient, reducing opportunities for stock pickers. As a result, broad based ETFs and index funds increasingly look like smarter choices for most investors.<\/p>\r\n<p><strong><b>Key Takeaways<\/b><\/strong><\/p>\r\n<ul>\r\n<li>ETFs trade in real time, unlike mutual funds.<\/li>\r\n<li>Liquidity is layered\u2014don\u2019t judge ETFs only by AUM or daily volumes.<\/li>\r\n<li>Always use limit orders and check iNAV before trading.<\/li>\r\n<li>Compare ETF prices with NAVs and underlying indices to avoid surprises.<\/li>\r\n<li>For large investments, consider creating units directly with the AMC (permitted for transactions above \u20b925 crore).<\/li>\r\n<li>In India, large-cap and mid-cap ETFs often outperform actively managed funds due to lower costs and efficiency.<\/li>\r\n<\/ul>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<\/div>\n<\/div>\n<script type='text\/javascript'>\n\tjQuery(document).ready(function() {\n\t\tjQuery('#text_slider').owlCarousel({\n\t\t\titems : 1,\n\t\t\tsmartSpeed : 400,\n\t\t\tautoplay : false,\n\t\t\tautoplayHoverPause : false,\n\t\t\tsmartSpeed : 400,\n\t\t\tfluidSpeed : 400,\n\t\t\tautoplaySpeed : 400,\n\t\t\tnavSpeed : 400,\n\t\t\tdotsSpeed : 400,\n\t\t\tdotsEach : 1,\n\t\t\tloop : false,\n\t\t\tnav : true,\n\t\t\tnavText : ['Previous','Next'],\n\t\t\tdots : true,\n\t\t\tresponsiveRefreshRate : 200,\n\t\t\tslideBy : 1,\n\t\t\tmergeFit : true,\n\t\t\tautoHeight : true,\n\t\t\tmouseDrag : false,\n\t\t\ttouchDrag : true\n\t\t});\n\t\tjQuery('#text_slider').css('visibility', 'visible');\n\t\tvar owl_goto = jQuery('#text_slider');\n\t\tjQuery('.text_slider_goto1').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 0);\n\t\t});\n\t\tjQuery('.text_slider_goto2').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 1);\n\t\t});\n\t\tjQuery('.text_slider_goto3').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 2);\n\t\t});\n\t\tjQuery('.text_slider_goto4').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 3);\n\t\t});\n\t\tjQuery('.text_slider_goto5').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 4);\n\t\t});\n\t\tjQuery('.text_slider_goto6').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 5);\n\t\t});\n\t\tjQuery('.text_slider_goto7').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 6);\n\t\t});\n\t\tjQuery('.text_slider_goto8').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 7);\n\t\t});\n\t\tjQuery('.text_slider_goto9').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 8);\n\t\t});\n\t\tjQuery('.text_slider_goto10').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 9);\n\t\t});\n\t\tvar resize_77920 = jQuery('.owl-carousel');\n\t\tresize_77920.on('initialized.owl.carousel', function(e) {\n\t\t\tif (typeof(Event) === 'function') {\n\t\t\t\twindow.dispatchEvent(new Event('resize'));\n\t\t\t} else {\n\t\t\t\tvar evt = window.document.createEvent('UIEvents');\n\t\t\t\tevt.initUIEvent('resize', true, false, window, 0);\n\t\t\t\twindow.dispatchEvent(evt);\n\t\t\t}\n\t\t});\n\t});\n<\/script>\n<\/p><p>\u00a0<\/p>                    <\/div>\n\t\t        \n                    <div id=\"slides-tab\" class=\"clearfix eael-tab-content-item \" data-title-link=\"slides-tab\">\n\t\t\t\t        <p><div class='white' style='background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;'>\n<div id='text_slider' class='owl-carousel sa_owl_theme owl-pagination-true' data-slider-id='text_slider' style='visibility: visible;visibility:visible;'>\n<div id='text_slider_slide01' class='sa_hover_container' data-hash='Introduction-to-ETFs' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.1 \u2013 Introduction to ETFs<\/b><\/strong><\/h2>\r\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-78026 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs.png\" alt=\"Introduction to ETFs\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Introduction-to-ETFs-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Imagine you invest in a mutual fund today. Your money is pooled with thousands of others, and at the end of the day the fund house calculates the value of all holdings, divides it by the number of units, and declares the NAV. You only know your purchase price that evening, when the NAV is published (by 11 pm). Now contrast that with buying shares of Infosys or Reliance\u2014you see the price instantly, and you can buy or sell at any moment during market hours.<\/p>\r\n<p>Exchange Traded Funds (ETFs) combine these two worlds. They are baskets of securities like mutual funds, but they trade on the stock exchange in real time like shares. This means you can react immediately to market movements, rather than waiting for end of day NAVs. For example, if you believe banking stocks will rally after a policy announcement, you can buy a Bank ETF at 11:05 AM and sell it at 3:15 PM the same day, before the market closes at 3:30 PM. That flexibility is the defining feature of ETFs.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide02' class='sa_hover_container' data-hash='The-Evolution-of-ETFs' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.2 \u2013 The Evolution of ETFs<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-78027 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF.png\" alt=\"The Evolution of ETF\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/The-Evolution-of-ETF-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Mutual funds have a century-long history. The first modern open-ended fund in the US dates back to 1924, while India\u2019s journey began in 1964 with the Unit Trust of India. ETFs, however, are a much younger innovation. The first widely recognized ETF, the SPDR S&amp;P 500 (ticker: SPY), launched in 1993, and today it is one of the most heavily traded securities globally.<\/p>\r\n<p>India entered the ETF space with Nifty BeES, which tracks the Nifty 50 index; it was launched in December 2001 and listed in January 2002. Over time, ownership changed hands\u2014from Benchmark AMC to Goldman Sachs, then Reliance, and now Nippon India Mutual Fund. This journey reflects how ETFs have grown from niche products into mainstream instruments worldwide.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide03' class='sa_hover_container' data-hash='ETFs-in-the-Indian-Context' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.3 \u2013 ETFs in the Indian Context<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-78028 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context.png\" alt=\"ETFs in Indian Context\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-in-Indian-Context-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Despite being available for over two decades, ETFs in India are still dominated by institutional investors rather than retail participants. For instance, the SBI Nifty 50 ETF has assets of over \u20b92 lakh crore (October 2026), largely because the Employees\u2019 Provident Fund Organisation (EPFO) invests heavily in it. Similarly, government divestment programs like CPSE ETF and Bharat 22 ETF have boosted ETF assets, but again, retail investors form only a small fraction.<\/p>\r\n<p>One reason for limited retail adoption is accessibility. Unlike mutual funds, which can be bought directly through apps or distributors, ETFs require a demat account and stock market familiarity. Another reason is incentives\u2014mutual funds pay distributors commissions, so they are actively marketed. ETFs, with thinner margins, don\u2019t get the same push. As a result, while ETFs are growing steadily, they remain underpenetrated compared to mutual funds.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide04' class='sa_hover_container' data-hash='What-Exactly-is-an-ETF?' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.4 \u2013 What Exactly is an ETF?<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78029 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF-.png\" alt=\"What exactly is an ETF\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF-.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-exactly-is-an-ETF--96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Think of an ETF as a \u201cwrapper\u201d holding a portfolio of securities. If you buy a Nifty 50 ETF, you are indirectly owning all 50 companies in the index in the same proportion. The difference from mutual funds is immediacy\u2014you can buy or sell ETF units on the exchange at any time during trading hours.<\/p>\r\n<p>For example, if you search for \u201cNifty ETF\u201d on your broker\u2019s platform, you\u2019ll see multiple options from different fund houses, all tracking the same index. The choice then depends on liquidity, expense ratio, and tracking accuracy.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide05' class='sa_hover_container' data-hash='How-ETFs-Operate' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.5 \u2013 How ETFs Operate<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78030 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate.png\" alt=\"How ETFs Operate\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/How-ETFs-Operate-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Mutual funds interact directly with investors\u2014when you invest, the AMC buys securities and later redeems them when you exit. ETFs, however, mostly bypass the AMC. Transactions happen between buyers and sellers on the exchange. If you sell your ETF units, another investor buys them; the AMC isn\u2019t involved in day to day trading. This makes ETFs more market-driven and dependent on liquidity.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide06' class='sa_hover_container' data-hash='Creation-and-Redemption-Mechanism' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.6 \u2013 Creation and Redemption Mechanism<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78031 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption.png\" alt=\"Creation and Redemption\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Creation-and-Redemption-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Here\u2019s where ETFs get interesting. Large investors or market makers can directly create or redeem ETF units with the AMC in bulk, known as \u201ccreation units.\u201d Creation units are large blocks, typically tens of thousands of units worth \u20b91 crore or more, and SEBI permits investors other than market makers to deal directly with the AMC only for transactions above \u20b925 crore. Institutions can deliver the underlying basket of Nifty stocks to the AMC, receive ETF units, and then sell them on the exchange.<\/p>\r\n<p>This mechanism ensures liquidity and keeps ETF prices aligned with their NAV. If ETFs trade at a premium, market makers create units at NAV and sell them at higher market prices, profiting while correcting the imbalance. If they trade at a discount, they buy ETF units cheaply, redeem them with the AMC for underlying shares, and sell those shares in the market. This arbitrage keeps ETFs close to fair value.<\/p>\r\n<p>A striking example was the Motilal Oswal NASDAQ 100 ETF, which at times traded at premiums of around 20% when fresh unit creation was constrained (including by the overseas investment limits on Indian mutual funds) and market makers could not arbitrage the gap. Once creation resumed and liquidity providers stepped in, the gap narrowed, showing how crucial this mechanism is.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide07' class='sa_hover_container' data-hash='Understanding-ETF-Liquidity' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.7 \u2013 Understanding ETF Liquidity<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78032 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity.png\" alt=\"ETF Liquidity\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETF-Liquidity-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Liquidity in ETFs isn\u2019t just about daily trading volumes or AUM. There are multiple layers:<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>Secondary market liquidity<\/b><\/strong>\u2013 What you see on your trading screen, i.e., bid-ask spreads and volumes.<\/li>\r\n<li><b><\/b><strong><b>Market depth<\/b><\/strong>\u2013 The hidden liquidity provided by market makers, who stand ready to buy or sell large quantities.<\/li>\r\n<li><b><\/b><strong><b>Primary market liquidity<\/b><\/strong>\u2013 Institutions can always create new units directly with the AMC.<\/li>\r\n<li><b><\/b><strong><b>Underlying stock liquidity<\/b><\/strong>\u2013 Ultimately, an ETF is only as liquid as the securities it holds.<\/li>\r\n<\/ol>\r\n<p>For example, India had no small-cap ETFs for many years\u00a0 because small-cap stocks often hit upper or lower circuits and lack sufficient liquidity. A sudden surge in demand can make it very hard for market makers to create units, leading to distorted premiums. In contrast, large-cap ETFs like Nifty 50 ETFs remain liquid because their underlying stocks are actively traded.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide08' class='sa_hover_container' data-hash='Types-of-ETFs-in-India' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.8 \u2013 Types of ETFs in India<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78033 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India.png\" alt=\"Types of ETFs in India\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Types-of-ETFs-in-India-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>India now offers more than 200 ETFs, and industry ETF assets crossed \u20b910 lakh crore in October 2025. They are mostly equity-based. Broadly, they fall into three categories:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Equity ETFs<\/b><\/strong>\u2013 These include plain vanilla index trackers like Nifty 50 or Sensex, as well as smart beta ETFs that focus on factors like low volatility or momentum.<\/li>\r\n<li><b><\/b><strong><b>Debt ETFs<\/b><\/strong>\u2013 Examples include Bharat Bond ETFs, which invest in PSU bonds, and G-sec ETFs.<\/li>\r\n<li><b><\/b><strong><b>Commodity ETFs<\/b><\/strong>\u2013 Gold ETFs dominate this space, followed by silver ETFs\u00a0<\/li>\r\n<\/ul>\r\n<p>While most ETFs are passive, tracking indices, smart beta ETFs blur the line by applying rules-based strategies. Globally, active ETFs are emerging, and India may eventually see them too.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide09' class='sa_hover_container' data-hash='ETFs-vs-Index-Funds' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.9 \u2013 ETFs vs Index Funds<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78034 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds.png\" alt=\"ETFs vs Index Funds\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Index-Funds-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Both ETFs and index funds aim to replicate an index, but they differ in mechanics. Index funds are priced once daily at NAV, while ETFs trade in real time. This makes ETFs more flexible for tactical strategies, like buying during intraday dips.<\/p>\r\n<p>However, ETFs come with bid-ask spreads and brokerage charges, while index funds are simpler\u2014no trading costs, easy SIP setup, and no liquidity concerns. For a long-term passive investor, index funds may be easier. For someone who wants flexibility and intraday control, ETFs are better.<\/p>\r\n<p>For example, if you want to systematically invest \u20b95,000 every month without worrying about timing, an index fund works well. But if you want to quickly exit during a market rally, ETFs give you that option.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide10' class='sa_hover_container' data-hash=' ETFs-vs-Actively-Managed-Funds' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>29.10 \u2013 ETFs vs Actively Managed Funds<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78035 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds.png\" alt=\"ETFs vs Active Funds\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/ETFs-vs-Active-Funds-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Globally, studies show that most actively managed funds fail to beat their benchmarks. In the US, nearly 90% of active funds underperform over long periods. In India too, SPIVA reports reveal that more than 70% of large-cap funds lag behind indices like Nifty 50.<\/p>\r\n<p>The main reason is cost. Active funds charge around 1.5% annually, while index funds or ETFs tracking Nifty 50 may cost just 0.1%. Over time, this difference compounds significantly. For instance, if two funds both earn 12% gross returns, the active fund investor may only see 10.5% after costs, while the ETF investor enjoys 11.9%.<\/p>\r\n<p>Even in mid-caps, where active managers were once thought to have an edge, many funds now struggle to beat benchmarks like Nifty Midcap 150. The market has become more efficient, reducing opportunities for stock pickers. As a result, broad based ETFs and index funds increasingly look like smarter choices for most investors.<\/p>\r\n<p><strong><b>Key Takeaways<\/b><\/strong><\/p>\r\n<ul>\r\n<li>ETFs trade in real time, unlike mutual funds.<\/li>\r\n<li>Liquidity is layered\u2014don\u2019t judge ETFs only by AUM or daily volumes.<\/li>\r\n<li>Always use limit orders and check iNAV before trading.<\/li>\r\n<li>Compare ETF prices with NAVs and underlying indices to avoid surprises.<\/li>\r\n<li>For large investments, consider creating units directly with the AMC (permitted for transactions above \u20b925 crore).<\/li>\r\n<li>In India, large-cap and mid-cap ETFs often outperform actively managed funds due to lower costs and efficiency.<\/li>\r\n<\/ul>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<\/div>\n<\/div>\n<script type='text\/javascript'>\n\tjQuery(document).ready(function() {\n\t\tjQuery('#text_slider').owlCarousel({\n\t\t\titems : 1,\n\t\t\tsmartSpeed : 400,\n\t\t\tautoplay : false,\n\t\t\tautoplayHoverPause : false,\n\t\t\tsmartSpeed : 400,\n\t\t\tfluidSpeed : 400,\n\t\t\tautoplaySpeed : 400,\n\t\t\tnavSpeed : 400,\n\t\t\tdotsSpeed : 400,\n\t\t\tdotsEach : 1,\n\t\t\tloop : false,\n\t\t\tnav : true,\n\t\t\tnavText : ['Previous','Next'],\n\t\t\tdots : true,\n\t\t\tresponsiveRefreshRate : 200,\n\t\t\tslideBy : 1,\n\t\t\tmergeFit : true,\n\t\t\tautoHeight : true,\n\t\t\tmouseDrag : false,\n\t\t\ttouchDrag : true\n\t\t});\n\t\tjQuery('#text_slider').css('visibility', 'visible');\n\t\tvar owl_goto = jQuery('#text_slider');\n\t\tjQuery('.text_slider_goto1').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 0);\n\t\t});\n\t\tjQuery('.text_slider_goto2').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 1);\n\t\t});\n\t\tjQuery('.text_slider_goto3').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 2);\n\t\t});\n\t\tjQuery('.text_slider_goto4').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 3);\n\t\t});\n\t\tjQuery('.text_slider_goto5').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 4);\n\t\t});\n\t\tjQuery('.text_slider_goto6').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 5);\n\t\t});\n\t\tjQuery('.text_slider_goto7').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 6);\n\t\t});\n\t\tjQuery('.text_slider_goto8').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 7);\n\t\t});\n\t\tjQuery('.text_slider_goto9').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 8);\n\t\t});\n\t\tjQuery('.text_slider_goto10').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 9);\n\t\t});\n\t\tvar resize_77920 = jQuery('.owl-carousel');\n\t\tresize_77920.on('initialized.owl.carousel', function(e) {\n\t\t\tif (typeof(Event) === 'function') {\n\t\t\t\twindow.dispatchEvent(new Event('resize'));\n\t\t\t} else {\n\t\t\t\tvar evt = window.document.createEvent('UIEvents');\n\t\t\t\tevt.initUIEvent('resize', true, false, window, 0);\n\t\t\t\twindow.dispatchEvent(evt);\n\t\t\t}\n\t\t});\n\t});\n<\/script>\n<\/p><p>\u00a0<\/p>                    <\/div>\n\t\t        \n                    <div id=\"videos-tab\" class=\"clearfix eael-tab-content-item \" data-title-link=\"videos-tab\">\n\t\t\t\t        <p><img decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2021\/10\/coming-soon-person-g8026473a8_1920-removebg-preview.png\" \/><\/p>                    <\/div>\n\t\t                    <\/div>\n        <\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Study Slides Videos 29.1 \u2013 Introduction to ETFs Imagine you invest in a mutual fund today. Your money is pooled with thousands of others, and at the end of the day the fund house calculates the value of all holdings, divides it by the number of units, and declares the NAV. You only know your &#8230; <a title=\"Exchange Traded Funds\" class=\"read-more\" href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/exchange-traded-funds\/\" aria-label=\"Read more about Exchange Traded Funds\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"parent":11088,"menu_order":14,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[],"class_list":["post-78082","markets","type-markets","status-publish","format-standard","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/78082","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets"}],"about":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/types\/markets"}],"author":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/comments?post=78082"}],"version-history":[{"count":4,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/78082\/revisions"}],"predecessor-version":[{"id":78171,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/78082\/revisions\/78171"}],"up":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/11088"}],"wp:attachment":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/media?parent=78082"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/categories?post=78082"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}