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An ETF is a collection of all the stocks in an index like Nifty 50, Nifty Bank, Sensex, and others. This means, unlike a stock that gives you access to shares of one company, an ETF gives you access to a basket of shares. That’s why ETFs are known to be a potential investment option for long-term investors. However, there are ETF trading strategies as well.
While an ETF is much like an index fund or mutual fund, it is listed on a stock exchange and is traded like shares. That’s why ETF investments are possible only with a Demat account that can be opened with an online investment app like Dhan.
ETFs do not have a minimum holding period and can be bought and sold at any time just like shares. What this means is that holding ETFs for the long term is possible based on the investment strategy you’re following.
Yes, you can start a SIP in ETFs in India. In fact, if you have Dhan you can invest in ETFs with a smart daily, weekly, or monthly SIP. Curious? Explore Dhan's SIP Calculator.
ETFs operate much like mutual funds. The fund management team uses the pool of money collected from investors to buy and sell securities. That said, ETFs can be sold at any time within market hours just like a stock.
Legendary investor Warren Buffet is known to be a proponent of ETFs and index funds that track an entire index's worth of stocks. The Oracle of Omaha puts his money where his mouth is as he’s known to hold various ETFs in the USA.
An ETF holds a basket of stocks and in return, may receive dividends. These dividends can either be reinvested or redistributed by the ETF, with many choosing the former. Either way, ETFs follow a dividend distribution process that’s similar to stocks.
Yes, it is possible to buy a Nifty 50 ETF using an online stock investment app. A Nifty 50 ETF is a collection of 50 of the biggest stocks in India by market capitalization.
Nifty 50 consists of the fifty biggest stocks in India by market cap, regardless of industry, sector, or niche. Nifty Bank on the other hand only consists of 12 banking stocks:
|ETF Type||STCG Holding Period||Tax on STCG||LTCG Holding Period||Tax on LTCG||Indexation Benefit|
|Index & sectoral||≤ 1 Year||15%||>1 year||10%||No|
|Gold & international||≤ 3 years||I-T slab||> 3 years||20%||Yes|