Exchange Traded Fund or ETF is special kind of a mutual fund, which is created and issued by a fund house, whose units are listed on stock exchanges alongside stocks and freely traded like stocks. The ETFs are created based on various underlying assets like stocks, bonds, gold, commodities, or a popular index like ‘BSE Sensex’. The advantage over mutual fund units is that the investor need not approach the mutual fund for redemption and can simply sell on the stock exchange, bringing liquidity to the instrument. The fund management charges are also lower compared to mutual funds since ETFs are passive funds involving minimum time and efforts of fund managers.
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