Top 5 Best ETF Funds In India

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What is an ETF fund?

An ETF (Exchange-Traded Fund) is a basket of stocks you can buy and sell on the stock market, just like a regular stock. It helps you diversify your money without buying individual stocks. For example, if you want to invest in the top 50 companies in India like Reliance, TCS, and Infosys, you can invest in a NIFTY 50 ETF, which holds all these stocks. This way, your investment follows the NIFTY 50 index.

A stock gives you ownership in a single company, while an ETF includes multiple stocks, reducing risk through diversification. Stocks carry higher risk because they depend on one company’s performance, whereas ETFs spread the risk across many companies. If you want a focused investment, choose stocks; if you prefer diversification with less risk, go for ETFs.

You can invest in different types of ETFs based on your goals. Equity ETFs focus on stocks, Bond ETFs invest in fixed-income securities, Gold ETFs track gold prices, and Sector ETFs target specific industries like technology or healthcare. Some ETFs, like ELSS or government-backed ETFs, also help you get tax relaxation under Section 80C, making them a smart choice for tax-saving investments. Pick the right ETF to match your investment strategy and save on taxes!

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Disclaimer: The information provided in this blog post is for educational purposes only and should not be considered financial advice.

Benefits of Investing in Top ETFs in India

  1. Diversification Across Multiple Assets
    ETFs hold a mix of stocks, bonds, or commodities within a single fund, reducing risk by spreading investments across multiple assets. Investors can choose from broad-market, sector-specific, or thematic ETFs based on their strategy.

  2. Lower Costs Compared to Mutual Funds
    ETFs generally have lower expense ratios since they are passively managed, tracking an index rather than relying on active fund managers. They also lack front-end or back-end load fees, making them a cost-effective investment option.

  3. Liquidity and Real-Time Trading
    Unlike mutual funds priced at the end of the day, ETFs trade on exchanges throughout the day like stocks, allowing investors to buy and sell at market prices in real-time. Highly traded ETFs offer better liquidity and lower transaction costs.

  4. Flexible Investment Strategies
    ETFs provide exposure to various markets, including sectors, commodities, and global indices. Investors can also use specialized ETFs like leveraged or inverse ETFs to hedge risk or amplify returns.

  5. Tax Efficiency for Long-Term Investors
    ETFs minimize taxable events through an “in-kind” redemption process, reducing capital gains taxes compared to mutual funds. This makes them a tax-efficient option for long-term investors.

With their combination of diversification, low costs, liquidity, flexibility, and tax benefits, ETFs are a smart choice for both passive and active investors.

Top 5 Best ETFs Funds In India

ETF NAME 1 Year Return 3 Year Return 5 Year Return
Nippon India ETF Nifty 50 BeES
22.19%
58.11%
109.11%
Mirae Asset NYSE FANG+ ETF
65.38%
92.38%
N/A
Nippon India ETF Nifty Midcap 150
31.16%
89.22%
237.14%
HDFC NIFTY Smallcap 250 ETF
30.82%
N/A
N/A
SBI GOLD ETF
23.20%
34.13%
89.84%

*Performance  Data Based On Date:19/11/2024. This Returns Not Based On CAGR*

Overview :

  • Investment Objective: The ETF aims to achieve this by investing in the same stocks that constitute the Nifty 50 Index.
  • AUM (INR): 34,093Cr.
  • No. Of Stocks: 50 
  • Expense Ratio:0.04%
  • Investment Objective: The primary investment objective of the fund is to track the performance of the NYSE FANG+ Index. Which is composed of 10 highly traded growth stocks in the technology and consumer discretionary sectors. Companies Like Facebook(Meta) ,Netflix ,Google(Alphabet) ,Apple 
  • AUM (INR): 2,369 Cr.
  • No. Of Stocks: 10
  • Expense Ratio: 0.66%
  • Investment Objective: Aims to replicate the performance of the Nifty Midcap 150 Index.
  • AUM (INR): 1,752Cr.
  • No. Of Stocks: 149
  • Expense Ratio: 0.21%
  • Investment Objective: Aims to track the performance of the Nifty  Small cap 250 Index
  • AUM (INR): 530Cr.
  • No. Of Stocks: 250 
  • Expense Ratio: 0.20%
  • Investment Objective: The objective of the SBI GOLD  ETF  is to provide investors with a convenient and cost-effective way to gain exposure to the price movement of gold.
  • AUM (INR): 5411Cr.
  • No. Of Stocks: 3
  • Expense Ratio: 0.65%

Factors to Consider Before Investing in ETFs

1. Investment Objectives Risk: How much risk are you willing to take? Some ETFs are safer, like those that invest in bonds, while others may be riskier, like those that invest in tech stocks.                                                                                                                        Time: How long do you plan to hold the ETF? Longer-term investments may handle  more risk, but short-term ones may require safer choices

2. Expense Ratio: This is the annual fee you pay to invest in the ETF. The lower the expense ratio, the less it costs to own the ETF. Always look for low-cost options to maximize your returns

3.Liquidity  (Ease of Buying/Selling): You want to buy and sell ETFs easily without paying too much extra. Look for ETFs with higher trading volume, meaning they’re more liquid and have lower costs to trade.

4. Performance History: Check how the ETF has performed in the past. While past performance isn’t a guarantee of future results, it can give you an idea of how it reacts to market changes.

5.Tracking Error: This tells you how well the ETF tracks the performance of its index (the market or sector it is trying to mimic). Smaller tracking error means the ETF is doing a good job following its index.

6.Reputation and Size of the ETFChoose ETFs from reputable companies with a good track record. Bigger ETFs (those with more money invested) tend to be more stable and easier to trade

ETF vs. Mutual Funds: Which One is the Smarter Investment Choice?

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  • A Trading & Liquidity – You can buy and sell ETFs anytime during market hours like a stock, while you can only buy or sell mutual funds at the end of the trading day at the NAV (Net Asset Value) price.
  • Cost & Expense Ratio – ETFs usually have lower expense ratios because they follow an index, while mutual funds charge higher fees due to active management.
  • Investment Style – Most ETFs track an index (like NIFTY 50), while fund managers actively manage mutual funds by selecting stocks to buy or sell.
  • Minimum Investment – You can buy even one unit of an ETF, but mutual funds often require a minimum investment amount.
  • Tax Efficiency – ETFs offer better tax efficiency since they generate fewer capital gains taxes compared to mutual funds.

    Which One Should You Choose?

    Choose ETFs if you want lower costs, flexibility, and real-time trading. Go for mutual funds if you prefer expert management and SIP (Systematic Investment Plan) options.

Why ETFs Are Ideal for Both Passive and Active Investors ?

ETFs combine cost efficiency, diversification, and flexibility, making them a valuable option for both passive and active investors.

For Passive Investors

  1. Low-Cost, Long-Term Growth – Most ETFs passively track an index, resulting in lower expense ratios than mutual funds, helping long-term investors maximize returns.

  2. Effortless Diversification – Investors can gain broad market exposure or sector-specific investments without the need for constant monitoring.

  3. Simple Buy-and-Hold Strategy – ETFs are well-suited for those who prefer a hands-off investment approach, allowing for steady wealth accumulation over time.

For Active Investors

  1. Real-Time Trading and Liquidity – Since ETFs trade like stocks, active investors can buy and sell throughout the day, capitalizing on market movements.

  2. Strategic Investment Opportunities – Sector-focused, leveraged, and inverse ETFs allow for hedging, short-term trading, and targeted market exposure.

  3. Tax Efficiency for Frequent Traders – ETFs generally generate fewer capital gains distributions compared to mutual funds, offering tax advantages for those who rebalance portfolios frequently.

Whether you’re a long-term investor seeking stability or an active trader looking for market opportunities, ETFs provide a versatile and cost-effective way to build a strong portfolio.

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