Axis MoneyPlex Knowledge Nugget - 118

Why should ETF be your investment of choice?

A lot of people fear to invest in mutual funds because they believe that mutual funds are a high-risk investment. But what they don’t realize is that no investment is considered to be risk-free and there is always some risk associated with every investment product. Hence, before putting your money in any scheme, it is better that as a responsible investor, you first identify your financial goal. Having a defined financial goal is the key to effective financial planning. Once you have a realistic goal set, it allows you to understand how much money you need to save regularly. The next step that follows is understanding your risk tolerance. A risk tolerance/appetite is nothing but an individual’s ability to bear losses in case the investment is affected by market volatility.

If you are considering mutual funds as an investment option, it is better that you keep a long term investment horizon. That’s because mutual fund investments that are held over a period of at least five to seven years may benefit from the power of compounding and also stand a chance of beating market inflation. Mutual funds are owned by asset management companies who collect money from investors sharing a common investment objective. This pool of funds is invested across the Indian as well as in foreign economy. Mutual funds are considered to have a diversified portfolio as they tend to reduce risk by allotting their assets in various marketable security such as equity, debt, government security, corporate bonds, call money etc.

Mutual funds are subcategorized based on a certain characteristic such as investment strategy /objective, risk profile, asset allocation etc. Exchange traded funds or ETF are those open-ended mutual funds that aim to generate capital gains by mimicking its underlying index with minimal tracking error.

To find out more about exchange traded funds, read further:

What are ETFs?

Over a period of time, ETFs have gained wide acclamation among other financial instruments. ETFs have become widely popular among seasoned as well as new age investors. Securities and Exchange Board of India (SEBI), the regulator of mutual funds in India defines ETF as, “an open ended scheme which replicates/tracks the particular index. Of the total assets, this fund must invest a minimum of 95 per cent in securities of a particular index (which is being replicated or tracked).” Exchange traded funds follow their benchmark, which could be anything like SENSEX, NIFTY, gold, real estate, etc.?

Why must you consider investing in ETFs?

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Statutory Details:?Axis Mutual Fund has been established as a Trust under the Indian Trust Act 1882, sponsored by Axis Bank Ltd. (liability restricted to ?1 Lakh).?Trustee:?Axis Mutual Fund Trustee Ltd.?Investment Manager:?Axis Asset Management Co. Ltd. (the AMC)?Risk Factors:?Axis Bank Ltd. Is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.