EXCHANGE TRADED FUNDS (ETF)

An ETF, or Exchange Trading Fund, is a diversified collection of securities that are traded on the stock exchange, including stocks, commodities, bonds, and currencies. Like stocks, ETFs experience price fluctuations as they are bought and sold on the exchange.

Consider the example of the Sensex Fund, which comprises all 30 stocks in the Sensex index. This fund offers the benefit of risk diversification through its basket of 30 stocks. Trading an ETF, such as the Sensex Fund or any other listed Index Fund, is similar to buying or selling stocks on the exchange. Unlike mutual funds, which calculate their NAV at the end of the day, the price of an ETF fluctuates throughout market hours.

Compare the returns of ETFs with those of fixed deposits and savings accounts.

Maximize your idle funds with ETFs, offering the potential for higher long-term returns than Savings Accounts and Fixed Deposits. Here's a comparison:

Annual returns:

Savings account: 3-6%

FDs: 6-7.5%

Nifty 50: 15.73%

In 3 years, an investment of Rs. 100,000 would yield:

Savings account: Rs. 109,273 (assuming 3%)

FD: Rs. 119,102 (assuming 6%)

Nifty 50: Rs. 155,002

Risk:

Savings account: Low

FD: Low

Nifty 50: Moderate

Investment cost:

Savings account: No management costs

FD: No management costs

Nifty 50: Moderate - Expense ratio of < 0.20% + Brokerage of < 0.40%

Early withdrawal:

Savings account: Allowed without penalty

FD: Penalty for premature withdrawal

Nifty 50: Allowed without exit load. Only cost is Brokerage

Source: https://www.amfiindia.com

^ For ETF based on index such as NIFTY

Assuming return of 3% (Savings A/C), 6% (FD), 15.73% (Nifty 50). Taxation not considered.

Basis Kotak Securities current delivery brokerage rate

* Nifty 3 year average return as of 2nd December 2019. Past performance is not indicative of future results.

How do Liquid ETFs compare to Savings Accounts and FDs in terms of performance?

Risk Levels:

• Savings account: Lowest
• FD: Lowest
• Liquid ETF: Low

Pre-tax Rate of Return:

• Savings account: 3%-6%
• FD: 6%-7.5%
• Liquid ETF: 5.15%#

Tax Payment:

• Savings account: To be paid by the investor
• FD: To be paid by the investor
• Liquid ETF: Not taxable in the hands of the investor

1-Year Return of Liquid ETFs:

• DSP Liquid ETF: 5.62%*#
• ICICI Prudential Liquid ETF: 5.35%*#
• Nippon India ETF Liquid BeES: 4.46%*#

Nifty 50:

- Allowed without exit load^. Only cost is Brokerage

^ For ETF based on index such as NIFTY

^^ Assuming return of 3% (Savings A/C), 6% (FD), 14.16% (Nifty 50). Taxation not considered.

** Basis Kotak Securities current delivery brokerage rate

* Nifty 3-year average return as of 26th November 2019 (3 Year CAGR). Past performance is not indicative of future results

# 1-year return as on 27th Nov, 2019 – average of ICICI Pru Liquid ETF, DSP Liquid ETF, and Nippon India Liquid BeES

***Past performance is not indicative of future results. Securities mentioned are exemplary and not recommendatory

*# Scheme related information as on 27th Nov, 2019; Source: https://www.valueresearchonline.com/

 What does Kotak Securities offer?

At Kotak Securities, we offer you access to trade in gold, index, sector-specific as well as international Exchange-Traded Funds. Here’s how you can invest:

• Call your dealer and place the order over the recorded phone line
• Login to www.kotaksecurities.com > Trading > Place Order> Bonds & ETFs.
• Call 30305757 to place an order through Call and Trade.
• Invest through your mobile using our Kotak Stock Trader (KST) application.
• Invest through KEAT PRO X, our real-time trading platform.