How to Found Best ETF in India – 2023

What is ETF ?

ETF stands for Exchange Traded Fund. It is a type of investment fund and exchange-traded product that trades on stock exchanges, like a stocks. An ETF is designed to track the performance of a specific index, sector, commodity, or asset class.

ETFs are structured by financial institutions to represent a diversified portfolio of assets. They allow investors to gain exposure to a wide range of assets. ETFs can hold different types of assets such as stocks, bonds, commodities or a combination thereof.

One of the main advantages of ETFs is their liquidity and flexibility. Like stocks, they can be bought and sold throughout the trading day at market prices. This makes them attractive to investors. Those who want the diversification benefits of mutual funds but with the flexibility to trade in exchange.

ETFs provide transparency, as their holdings are usually disclosed daily. This allows investors to see exactly what assets are held in the fund. Additionally, ETFs often have lower expense ratios than mutual funds. That makes ETFs a cost-effective investment option.

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Key Points to Find Best ETF

When looking for the best ETF, consider the following key points:

  1. Index Tracking:

    Look for ETFs that closely track their underlying index. A good ETF should have low tracking error, meaning it closely matches the performance of its benchmark index.

  2. Expense Ratio:

    Consider the expense ratio, which represents the annual cost of owning the ETF. Lower expense ratios are generally more favorable as they can have a significant impact on long-term returns.

  3. Liquidity:

    Check the average daily trading volume and bid-ask spreads of the ETF. Higher liquidity ensures that you can buy or sell shares at fair prices.

  4. Holdings and Diversification:

    Examine the ETF’s holdings and diversification strategy. Ensure that the ETF provides exposure to a diversified portfolio of assets.

  5. Size and Assets Under Management (AUM):

    Consider the size of the ETF and its AUM. Larger ETFs often have more liquidity and can potentially offer greater stability.

  6. Tax Efficiency:

    Assess the ETF’s tax efficiency, particularly if you are investing in a taxable account. Some ETFs are structured in a way that minimizes taxable distributions, which can be beneficial from a tax perspective.

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Best ETF in India to Invest in 2023

Not all ETFs perform the same in all market conditions. As market conditions change, so does the performance of ETFs. Because, the investment strategy of that fund works very well some years. May not be effective again in any year. So do as much research as possible and be careful while choosing ETFs.

So, we thought that in the beginning of 2024, we will tell you about 5 best ETFs. That fund has given best returns in past years. To calculate the returns, we have considered the numbers as on 29 March 2023:

ETFs Name  Type  Asset Size (in ₹ Crores) 1 M Return (%) 1 Y Return (%) 5 Y Return (%) Expense Ratio (%) More Info
HDFC Sensex ETF Index ETFs 310 2.73 10.72 86.52 0.05 Click Here
Motilal Oswal NASDAQ 100 ETF Global Index ETFs 5793 5.91 1.53 103.91 0.10 Click Here
Aditya Birla Sun Life Gold ETF Gold ETFs 534.4 0.75 20.05 85.59 0.25 Click Here
ICICI Prudential NV20 ETF Sector ETFs 61.75  2.01 12.66 110.93 0.12 Click Here
SBI-ETF 10Y Gilt Bond ETFs 2849.2 2.03 9.07 36.59 0.14 Check Price

Remember, it is crucial to do thorough research before choosing the best ETF for your portfolio. Consult a financial advisor. Which can also provide personalized guidance based on your individual circumstances.

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Deference between ETF vs Mutual Fund ?

The main differences between ETFs (Exchange-Traded Funds) and Mutual Funds can be summarized as following Table:

ETF vs Mutual Fund
Investment Type ETF Mutual Fund
Structure ETFs are traded on stock exchanges like individual stocks Mutual Funds are bought and sold through the fund company at the end-of-day net asset value (NAV) price.
Trading ETFs can be bought and sold throughout the trading day at market prices. Mutual Funds are traded only once per day after the market closes.
Cost The cost of ETFs is relatively low. Mutual funds tend to have higher relative expense ratios.
Transparency ETFs typically disclose their holdings on a daily basis. Mutual funds usually disclose their holdings less frequently, such as monthly or quarterly.
Tax Efficiency ETFs tend to be more tax-efficient. ETFs are structured in a way that can help minimize the distribution of Capital Gains Tax. Less tax-efficient than mutual funds.
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