ETF
Exchange-Traded Fund
A basket of securities that trades on the stock exchange like a single share.
Detailed explanation
An ETF holds a portfolio — usually an index, gold or bonds — and issues units that you buy and sell through a broker during market hours at live prices. Because trading happens on the exchange, the market price can drift slightly above or below the underlying value, a gap called the premium or discount.
Example
A gold ETF with an underlying value of ₹62.10 per unit may trade at ₹62.60 on the exchange — a 0.8% premium caused by demand.
Why it matters
ETFs give index-style diversification with intraday liquidity, but you need a demat account and must watch liquidity and spread.
Key points
- Priced continuously during market hours, unlike a mutual fund's single daily NAV.
- Low expense ratios, but brokerage and bid-ask spread add to cost.
- Thinly traded ETFs can be expensive to enter or exit.
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.