ETF

An Exchange-Traded Fund is a pooled investment vehicle that holds a basket of underlying securities — usually tracking a benchmark index — and trades on a stock exchange like a single share. Buy one unit of a Nifty 50 ETF on NSE and you own a proportional slice of all 50 constituent companies, at their index weights. ETFs combine the diversification of a mutual fund with the intraday liquidity and transparency of a stock, which is why global ETF AUM crossed $13 trillion in 2024.

The cost advantage is decisive. Expense ratios on broad-market ETFs run 0.03–0.50% — compared with 1.0–2.5% for actively managed mutual funds. A 1% difference in fees on a ₹1 crore portfolio over 30 years costs roughly ₹70 lakh in forgone compounding. Popular ETFs by market: Nippon ETF Nifty 50 and ICICI Prudential Nifty 50 (India), VOO and SPY (US S&P 500), VWRL (UK global), VAS (Australia ASX 300). ETFs distribute dividends to holders or reinvest (accumulating variants).

ETFs on Indian exchanges attract the same LTCG/STCG rules as equity mutual funds (12.5% LTCG above ₹1.25L after 12 months; 20% STCG). Liquidity varies — pick ETFs with daily trading volume well above your planned transaction size to avoid wide bid-ask spreads.

Pair an ETF-based core portfolio with our SIP and asset allocation calculators to design a low-cost, tax-efficient long-term plan.