An ETF is a type of fund that owns the underlying assets and is divided into different shares. It is a marketable security (in the form of shares) that contains a slice of cumulated shares/bonds/commodities/foreign currencies that is sliced into different shares. Gold ETF is an important instrument in the NSE. Following are the main features of ETFs.
ETFs as funds owns underlying assets like shares of different companies.
- The shares of different companies are pooled together and these cumulated shares form the asset base of ETFs.
- Then the cumulated assets are divided into different units and these units are listed and traded in the stock exchange as ETFs.
- These ETFs that are listed in the stock exchanges are considered like shares (of ETFs) and can be traded like ordinary shares.
- Thus, the ETFs are listed and traded in the stock exchange like shares.
- The ETFs trading value is based on the net asset value of the underlying stocks that it represents.
- In nature, the ETFs are index funds (funds that comprised of shares of different companies - indexation)
