- Tradable: ETFs are mutual funds that are listed on the stock exchange and can be traded just like stocks.
- Cost effective and expense: ETFs generally charge a lower expense fee as compared with conventional mutual fund schemes
- Diversification: Constituents of ETFs are generally diversified across sectors. This may help in reducing concentration and enhancing risk adjusted returns over long-term time periods.
- Transparency in holding and price: The underlying securities are generally disclosed on a regular basis. Moreover, unlike conventional mutual fund schemes, ETFs also disclose their underlying securities every day on the website.
- Liquidity: units of ETF can be traded on a real time basis on stock exchange.
Gold ETF: A gold exchange traded fund is nothing but exchange listed mutual fund representing some units of gold. Each unit represents one gram of gold generally and in the case of quantum gold ETF, it is 0.5 grams. The ETF can be traded on the stock exchange. To buy one needs to have a demat and a trading account
Investors can enjoy the benefit of price appreciation of gold without any issue of safety or warehousing (storage or storage charges).
Recently some mutual funds have come forward to invest in Gold ETF schemes under the fund-of-fund option.
Net Asset Value:
The NAV is nothing but the market price of each unit of a particular scheme in relation to all the assets of that scheme.
It may be otherwise called the ‘intrinsic value’ of each unit. This value determines how much value of our investment has earned for us (to calculate Return on Investment).
If the NAV is more than the face value of the unit, it means that the fund is doing well and has made a profit.
In other words, Net Asset Value is the worth, in market terms, for each unit of the fund. It is calculated as the market value of all investments in the fund less liabilities and expenses divided by the outstanding number of units in the fund. Most schemes announce their NAVs on a daily basis.
If the applicable NAV is Rs. 10.00 and the exit/redemption load is 1%, then the Repurchase Price will be Rs. 9.90.