Definition of ETF (Exchange Traded Fund)
An ETF (Exchange Traded Fund) is a type of investment fund that tracks an index, commodity, sector, or basket of assets and trades on a stock exchange just like a regular stock — with real-time prices throughout the trading day.
ETFs are similar to index funds in concept (passive, low-cost), but differ in how they are bought: index funds are purchased at end-of-day NAV from an AMC, while ETFs are bought and sold on exchanges (like NSE/BSE) at live market prices through a demat and trading account.
Popular ETFs in India include Nifty 50 ETFs (Nippon, SBI, HDFC), Nifty Bank ETF, Gold ETFs, and international ETFs. ETFs generally have lower expense ratios than even direct index funds, but require a demat account and are subject to brokerage charges and bid-ask spread costs. For regular SIP-style investing, direct index funds are more practical than ETFs for most retail investors.