Home >>ACMIIL Home >> ACMFSL Home >> ACMRES Home >> Resume Status Home >> Apply Now Home >> Culture Home >> Current Opening Home >> Deenas World Home >> Faq's Home >> Financial Terms Home >> Five W’s of Investment Home >> Health Checkup Home >> Investmentz Online Home >> Management Team Home >> Media Corner Home >> NRI Center Home >> Register Now Home >> Research Home >> FAQ's Home >> Knowledge Support Home >> Why Investmentz Home >> Sitemap Home >> Career Home >> Gallery Home >> Feedback Home >> Disclaimer Home >> Privacy Home >> Services Home >> Tools & Platforms Home >> Investment Products Home >> About Us Home >> Contact Us Home >> Download Home >> Security Home >> My Subscription Home >> Retail Investors Home >> NRI Investors Home >> Institutional Investors Home >> Corporate Clients Home >> Bank Home >> Alternate Investment Fund Home >> Financial Planning Home >> Investment Advisory Home >>Portfolio Tracking


Change Font Size: A+ A-

Exchange Traded Funds (ETF) Overall RATE RATE (0.00)

Buying gold on the stock exchange?? Is it possible?? It's a commodity, so we could purchase it only from a commodity market. Well, but buying gold on the stock exchange is now possible with the eminent introduction of Exchange Traded Funds that will invest in Gold only. Accumulation of gold for a marriage in the family is a popular Indian custom. Instead of physical acquisition of gold or Demat the same, we go a step forward and buy shares that represent gold. Let us first understand the concept of Exchange Traded Fund (ETF) then understand about the advantages of buying gold ETF.


ETF is defined as a security that tracks an index, a commodity or a basket of assets like an index fund but trades like a stock on an exchange and experiences price changes throughout the day as it is bought and sold. ETF were first launched in 1993 in United States. Their popularity as a structured product has grown immensely because of the benefits it provides to investors and traders. The issuance of ETF is just like a primary market IPO or a mutual Fund NFO. Shares are issued by the Fund manager and listed on the exchanges. Investors can buy and sell these shares from the secondary market through their brokers.  ETF often called index shares, are a hybrid of index mutual funds and stocks. Some popular funds are


ETF name

ETF Symbol

Underlying Asset which it tracks

Street Tracks Gold Shares








S&P 500


The advantages of a traded fund shares are:


Tradable and diversifiable: ETF offers a unique advantage as they are diversifiable like mutual funds and also can be traded like stocks. Mutual funds cannot be traded each day like a stock.

Low cost: ETF like an Index fund, it does not require active fund manager and is therefore cheaper as passively managed.


Transparency: ETF is a very transparent instrument, as everyone knows the underlying asset. It makes multiple trading strategies possible. Arbitrage opportunities between cash and futures market can be availed at low cost. Trading strategies can be applied with stop loss orders.


The disadvantages are:


Broker and commission costs:  ETF are traded through brokers and hence every time brokerage has to be paid which becomes costly affair if regular trades are done.


Premiums and discounts: An ETF might trade at a discount to the underlying shares. This means that although the shares might be doing very well on the bourses, yet the ETF might be traded at less than the market value of these stocks.


There are different types of ETF unlike close-ended funds can create or cancel units as investors enter or leave the fund. The size of the ETF, rather than the price, will fluctuate based on the demand and supply for the ETF.


There are several ETF launched till date which can be broadly categorized as follows:


Global ETF: There are ETFs tracking indices beyond the domestic markets. Ex-specific regional funds that track fast growing markets in China and Korea.


Fixed Income ETF: ETF tracking fixed income products. ETF in this case may declare and pay dividends.


Commodity ETF: ETF that track commodity or commodity indices take advantage from the gains in the commodity market.


Currency ETF: ETF tracking currency or currencies. Ex ETF- Euro Currency Trust (FXE) was introduced in Dec 2005, which trades on the NYSE.  Hence investors can take exposure in Euro through this fund.


It is also important to understand the difference between a Mutual Fund and ETF. Trading in ETF takes place on the stock exchanges during trading hours. The Mutual fund units are however purchased from the Mutual Fund at NAV at the end of the day. The expenses are low in an ETF since there is no active fund management involved as in case of mutual funds.  The costs in mutual funds are higher in short term since they are subject to load fees, annual management fees, exit fees etc. These are intended to discourage frequent trading. Dividends are rarely made in ETF whereas there are frequent dividends made depending upon the mutual fund holding. As per Indian tax laws, the redemption amount received from mutual fund units are not subject to tax, however in case of ETF if representing gold, which is a commodity and not stock there would be tax payment in event of appreciation. ETF are regulated by the same authority, which regulates mutual funds. In the Indian context SEBI is the regulator.


ETF is not a new concept in India. There have been two ETFs launched in India; one is based on Sensex that was called SPICE and another was launched with Nifty as an underlying asset, it was gold Nifty BEES. However both these instruments failed to attract the attention of investors. These instruments allowed the investors to buy index in the form of shares. The investors apparently preferred to buy shares included in the index directly by buying index baskets or purchased index in derivatives markets.


Falling interest rates has forced Indian household to look at other classes of assets to hedge their portfolios as well as improve the yield on their basket of assets. Given the fascination for gold among Indians the current launching of gold-based ETF has obvious advantages. Gold can be bought like a share on stock exchanges; storage will be done by the Fund manager, no security risk, no impurity risk, and no cost of making charges. Costs will be low and same channel of trading and delivery like shares will be used.  Innovation of products in Indian markets is welcome. Time will tell whether despite obvious advantages Indian savers will continue to buy gold from jewelers and banks or from the stock exchanges.



Written By:

Deena A. Mehta

Managing Director

Asit C. Mehta Investments 


Written by : blog admin

Investor Education: Step by Step Guide to Naive Investors Overall RATE RATE (0.00)

Lots of investors wish to participate in equity markets but do not know where to start from. Some have partial knowledge about the markets and there are others who are completely ignorant. There are others who take great pride in saying I do not invest in stock market. As I have written in the first & second issues of market wisdom, the Indian saver cannot ignore equity investments; falling interest rates and withdrawal of tax concessions on income generated out of government and bank savings coupled with rising inflation has necessitated participation in equity markets. Equity investments have a potential of generating highest revenue compared to other financial investment options. Knowledge of course is the first requisite.


There are several ways of getting introduced to the stock market, I would recommend the way which is the safest 


  • To begin with reading about the markets is the first requirement.


  • Start reading the share market page in the newspapers. There is a summary on the stock prices' page of what happened during the day that gives you a fair idea of the market activity.


  • Business channels on the television also make you familiar about the markets. If you are working during the day, then watch the market report, which is broadcast by most channels in the evening.


  • There are also websites like www.moneycontrol.com specifically dedicated to markets providing regular updates.


  • Initially it may sound very boring. It can be made interesting if you focus on 2-3 stocks only. Just pick names that are familiar to you such as Reliance, Infosys, etc. You may also be working for a company or bank or supplying to any company, then select such names. Housewives identify the stocks by reading the labels displaying the manufacturing company name on the packaged product they buy. Students can look at the company stocks that they have done research projects in. In short there are enough company names available around us. Maintain a journal or a diary and write down these company names. To make it more interesting, predict the stock price for the next day, whether it will go up or down and why. Spend 15 minutes daily and write down whether your predictions were right or wrong and why.


If you do this for 6 months on a continuous basis then you would have sufficient knowledge to experiment with the market.


Do not commit any money at this stage. Assume that you have Rs.1 lac and note it in your diary as capital. Make buy decisions with this money in the 2-3 stocks that you have been studying. Make a note of it in the diary by looking at the closing prices take buy-sell decisions. Each time you make or lose money, write down why it happened. Several analysis of leading company stocks is available on business channels, web sites and business news papers. Plus you will also read news items. Another important source of information is website www.bseindia.com / www.nseindia.com. These are the official web sites of Bombay Stock Exchange - BSE Ltd and National Stock Exchange. which captures results and news about companies. During this period there has to be intensive self-learning. Try to analyze why your decision was correct or otherwise. In a rising market you will be very successful often, that does not mean you are a great stock picker. Learning will happen only if you analyze the reasons for rise or fall in prices. Doing this on a regular basis for 3 months equips you to start committing money.


In order to start trading on the exchange, three accounts are necessary


  1. a Trading account with a broker,

  2. a Beneficial Owner account with a Depository Participant and

  3. Bank account.


    Most of you would have a bank account. However, for online trading, a Bank with either online banking or core banking facilities is necessary for hassle-free trading. Hence if your bank does not offer such services then a new account would be essential. Most online brokers have tie-ups with Banks for online transfers, once you select a broker then look up for the banks which have links with the broking site, open account with such a bank. I have already written about Broker selection in Market Wisdom, which should be referred to in order to select the right broker.


    The account opening form of the broker has four components - The Know-Your-Client (KYC) form, separate agreements for trading on BSE and NSE, Risk Disclosure Document and certain Power of Attorneys. Ensure that you read the Power of Attorney carefully and give authority only for delivering shares to exchange on your behalf against your sale trades and not for any thing else. The KYC form captures your contact details and your financial worth. This Form is also accompanied with Proof of your identity, proof of your residence and Permanent Account Number (PAN) card. Proof of identity can be given by submitting a copy of your Passport, Voters card etc. You need to get your photograph attested by your banker. Proof of address is ration card, latest electricity bill etc. All documents should be produced in original for verification.


    Make sure you read the risk disclosure document before signing and submitting to the broker. This document will explain the different risk involved with your transaction for which you will be responsible. There is an inherent risk of price variation (volatility) of the securities you have dealt in, risk due to low liquidity in a particular company, risk due to more than normal difference between a person wanting to buy and another wanting to sell. The document also explains certain risk mitigation measures that can be used by you. 


    On submitting the completed set of document, the broker will scrutinize and if found everything in order will allot a code normally referred to as client code to you. You may need to furnish this code every time you want to transact. Having got your client code you can start transacting in the stock market. However you need to ensure that you have paid the requisite margin money as stipulated by your broker to place any transaction. Initially you start with placing orders in small quantity between 1 to 10 shares. Once you have understood the system in full you may gradually increase the size of your transaction.




    Written By:


    Deena A. Mehta

    Managing Director

    Asit C. Mehta Investments




Written by : blog admin

Older Posts

Today’s Poll

Today’s Poll
Will Nifty Hold 8500 Level till Diwali?

Most Read

Is Financial Compatibility the Key to a... by blog admin 05-Feb-2016, 00:00 Hours IST
How your financial goals help you in fi... by blog admin 17-May-2016, 00:00 Hours IST
Importance of striking the right balanc... by blog admin 20-Jan-2016, 00:00 Hours IST
SEBI Reg. Nos | BSE CM:INB 010607233 & Derivatives:INF 010607233 | NSE CM:INB 230607239 | Derivatives INF 230607239 & Currency Derivatives INE 230607239 | MCX SX INB 260607230 | Derivatives INF 260607230 and Currency Derivatives INE 260607230 | DP: IN-DP-CDSL-28-99 and Merchant Banking INM000010973.