ETF Calculator is going to be very useful for every investor who wants to make investment in Exchange Traded Fund (ETF’s) or currently have invested in ETF.
ETF’s are the best way to diversify your investing. If you are someone who just want to invest rather than trade, than you need to know the benefits of diversification while investing.
ETF’s are beneficial for those who either does not have time or knowledge to segregate stocks, as it is a well diversified product one can simply buy a single unit in case of being bullish or sell in case of being bearish overall.
To use moneycontain ETF Calculator you just need to enter the total investment made in ETF, Enter the returns (%) which is usually remains between 15to 25% it can even be more or less, enter the time period for the investment in months and that’s it.
Once the values are entered you will get the result, however one thing I would like to tell, the results do not include the dividends earned from ETF’s in case if any company gives the dividend during the investment tenure.
So, go ahead and try it yourself using the etf calculator, later in this post we will know some interesting things about exchange traded funds.
How ETF Works?
In layman term Exchange Traded Fund (ETF’s) is a combination of mutual funds and stocks, similar to a mutual funds it pools funds from multiple investors, has a fund manager, and Net Asset Value (NAV) like a mutual fund on the other hand just like a stock it gets traded on a daily basis when market is open and can be bought and sold easily.
So basically ETF’s are mutual/Index funds scheme which is listed on stock exchange and gets traded like a stock. ETFs are a cash market product and trade in the Capital Market segment of NSE and BSE.
Example Of ETF’s: Lets say the closing NAV (net asset value) of a NIFTY 50 ETF on April 23, 2021 was 100. On the next trading day, if NIFTY 50 index moves up by 1% by 10:30 am, NIFTY 50 ETF will trade around in its iNAV (indicative NAV) on exchange which will also be higher by 1%, i.e. 101 at 10:30 am on April 24, 2021.
The investor who wants to buy or sell ETF units from exchange (in multiples of one unit) can go to
their brokerage account and trade in ETF units just like stocks.
Note: iNAV provides an intraday indicative value of an ETF based on the intraday market values of its underlying constituents. It is used as a reference point for ETF trading.
ETF aim is to track the performance of a specific index such as NIFTY 50, NIFTY Next 50, NIFTY Bank, FINNifty etc. Which means ETF are depended upon it’s underlying assets and track the performance of the same, For example, a NIFTY 50 ETF seeks to generate return which is similar to NIFTY 50 Total return index.
These ETFs can be based on indices tracking various asset classes like equity shares (NIFTY 50 ETF), bonds (10 year G-Sec ETF), Gold (Gold ETF), Tri-party Repo (Liquid ETF) etc. When I say it mimics the underlying, not only in terms of performance but also in constituents.
So, whatever will be the weight of all securities in a particular index the similar weightage will be given in ETF. For example, if XYZ company has a weight of 12.50% in NIFTY 50, a NIFTY 50 ETF will also have 12.50% of XYZ company by weight in its portfolio.
Hence, ETF’s buy all securities in the exact proportion as that of its underlying index. Similarly, index mutual funds also builds their portfolio like this but not always replicates the benchmark index, also units of mutual funds are not traded live in stock market whereas shares of ETF’s are traded live in secondary market.
Currently there are over 100 ETFs available in India, out of which 65 ETFs are linked to 22 different Equity Indices (11 Gold ETFs and 89 Other ETFs (that track various debt and equity indices)).
ETFs are considered as a much safer product for risk averse and first time investors who want market linked returns. I hope you now have a basic understanding of How ETF Works in general.
Different Types Of ETF’s in India?
In India as of now you can categorize ETF’s in 5 broader categories:
1. Equity Index ETF – Index ETF are simply those ETF’s that replicates (performance and weightage) different Indices such as (Nifty50, BankNifty, Niftynext50 etc.) Index Exchange Traded Funds are the oldest and most common of the ETF product offerings. Index ETF’s helps one to get diversification as well as the returns. One can trade in them just like intraday trading in futures and options or take delivery like stocks.
So suppose you are overall bullish on the market, now instead of cherry picking a particular stock you can simply buy the whole Index. The minimum lot size is 1 for all ETF’s so it does not even require lot of capital you can simply buy the Index as a share. NiftyBees is one of the example of Equity Index ETF’s.
2. Gold ETF – If you want to keep the gold as a part of your portfolio than instead of buying it in physical form you can simply buy the gold ETF just like a normal share of a stock on exchange. Gold ETF’s are units representing physical gold, this may be in paper or dematerialized form and hence you can even buy a physical gold or jewellery just by selling the gold ETF. Thee are no STT or wealth tax on gold ETF moreover no theft or storage issue.
Prices of gold ETFs move hand on hand with that of physical gold. When the price of gold moves up, the value of ETFs appreciates and vice versa. GoldBees is one of the gold ETF example.
3. Debt ETF – Debt Exchange Traded Funds (ETFs) are simple investment products that allow the investors to take an exposure to the fixed income securities. These debt ETFs combine the benefits of debt investments with the flexibility of stock investment and the simplicity of mutual funds. Debt ETFs trade on the cash market of the like any other company stock, and can be bought and sold continuously at live market prices.
Debt ETFs are passive investment instruments that are based on indices and invest in securities in same proportion as the underlying index. InfraBees is one of the example of debt ETF’s.
4. Liquid ETF – Liquid ETFs are those funds whose unit price is derived from money market securities which consist of government bonds, treasury bonds, call money market etc. As the name suggest it offers high liquidity with low risk and reasonable market returns. Another important factor is Liquid ETF’s can be used as a margin for NSE Cash and derivative segment with 10% haircut.
5. Global Indices/International ETF – Global Equity Exchange Traded Funds (ETFs) are simple investment products that allow the domestic investors to take an exposure to international indices. For example if you want to invest in stocks listed n U.S NASDAQ 100 you can simply trade or invest in Motilal Oswal MOSt Shares NASDAQ 100 ETF -GO. It mimics the underlying Nasdaq100 and provides the same returns with exact constituents.
I hope you now have a basic understanding of different types of Exchange Traded Funds currently operates in India.
You can use ETF Calculator by moneycontain to calculate any ETF’s return within seconds.
How ETF Calculator Works?
Moneycontain ETF calculator is very useful in knowing the expected return earned from etf while making a investment for definite period. Let us understand through two different examples, first checkout the image below of Motilal Oswal NASDAQ 100 ETF -GO taken from NSE Website.
As you can see in the image above, Motilal Oswal Nadaq 100 ETF 52 week low is around Rs.630 which was on 04 May 2020 last year, however since than till April 23, 2021 it made a high of Rs.1059, using moneycontain CAGR calculator we can find the returns in percentage which is around 76% in returns in last 11 months.
Now, let use the moneycontain ETF Return calculator to know how much money if invested in this particular ETF would have given you for the same tenure, For this let us assume you have invested Rs.50,000, check out the image below to know:
Yeah?, it is whopping Rs.83,950 almost Rs.84K within 11 months or so, moreover incase if dividends are paid by any company in the tenure will also get added depending upon the weightage of that particular stock in ETF.
Likewise you can easily calculate the returns earned from ETF using the ETF Calculator within seconds.
How To start investing in ETF’s In India?
- Trading Account
- Demat Account
A trading account is required to place the order online or through a call to your stock broker and demat account is required to hold the ETF’s units in demat while investing.
Many stock brokers such as Groww Zerodha, Upstox, Fyers, 5Paisa, ICICIdirect, Espresso, allows open a trading and demat account online within minutes. Once the account is opened you can simply select the ETF’s that you want to trade or invest in using online trading platform and start placing orders.
Just like shares of a stock the settlement process for ETF’s also follows T+2 days. Let us now understand some of the advantages of ETF’s. Let us go ahead and clear out some basic ETF Question.
What are the Benefits of ETFs?
There are many benefits of trading or investing in a Exchange Traded Fund (ETF’s) most of them are listed below:
- ETF’s provide real time trading and pricing throughout market hours just like stocks which is not available in case of mutual funds.
- ETF’s are beneficial for those who either does not have time or knowledge to segregate stocks, as it is a well diversified product one can simply buy a single unit in case of being bullish or sell in case of being bearish overall.
- Lower capital requirement is also one of the major advantage to trade and invest in ETF’s.
- Due to the unique structure of ETFs, all types of investors, whether retail or institutional, long-term or short-term, can use it to their advantage.
- Since an ETF is listed on an Exchange, costs of distribution are much lower and the reach is wider. These savings in cost are passed on to the investors in the form of lower costs.
- The biggest advantage of ETFs over actively managed funds is cost. The expense ratio of ETFs can be upto 1.5 to 2.25% lower than actively managed funds. Which means that an actively managed funds need to beat their benchmark by that margin to match returns of comparable ETFs.
- Investing in ETF is much simpler than investing in actively managed funds. You do not have to analyze past performance, understand the fund manager’s investment style e.g. Growth, Value or study fund’s performance in up and down markets etc. Simply you may select an index and invest in a low cost ETF, which tracks that index.
- Dividends from ETF schemes are tax exempt for investors. If an investor sells ETFs units before 12 months, he is liable to pay short term capital gain tax at the rate of 10 percent. At the time of redemption the investor need not pay tax. They are also exempt from wealth tax. However, the time of redemption investors would need to pay securities transaction tax (STT) at 0.25 percent on the value of redemption.
- Investors who have a negative view on a market segment or specific sector may want to establish a short position to capitalize on that view. ETFs may be sold short against long stock holdings as a hedge against a decline in the market or specific sector.
Frequently Asked Question (FAQ):
Is ETFs riskier than stocks?
No, not at all ETF’s are the most secured form of investment and at any given day it is much safer than investing your money in a stock due to diversification. Moreover, you can invest as well as trade ETF’s just like stocks.
Does ETF Pay Dividends?
Yes, ETF’s do pay dividends similar to stocks, for example if a company whose stock is included in a ETF announces dividends, than depending upon the weightage of that stock in ETF, dividends will be payed to the investor in his demat account.
Is It Possible to Sell ETF ?
Yes, of course you can buy or sell ETF’s just like stocks during intraday trading, the only thing you need to keep in mind is either to square off your sell position before markets get closed or take delivery of the ETF’s in your demat account.
Which Is Better ETF’s Or Mutual Fund?
If you want to beat the benchmark Index returns than mutual funds are better whereas if you are ok with the Index return only ETF’s are better.
According to the Efficient Market Hypothesis, no fund manager can outperform the market forever and outperforming strategies are quickly imitated and arbitraged away.
Hence in the long run, simply investing in the whole market passively tends to outperform active stock picking. If you believe in this financial theory, ETFs are a better product than actively manages funds.
If you are looking for low-cost passive investment options over the long term & do not have time to track markets closely, then ETFs are good avenues to create wealth for achieving your financial goals.
If we talk about the recent ETF, Mirae Asset NYSE FANG+ETF is launched just few days back, the Bharat Bond ETF April 2030 and BHARAT Bond ETF April 2023 which were launched in December 2019 and Bharat Bond ETF April 2025 and Bharat Bond ETF April 2031 which were introduced in July 2020 respectively.
Moreover, HDFC Banking ETF, ICICI Prudential Alpha Low Vol 30 ETF, and ICICI Prudential IT ETF were launched in August 2020, UTI Bank Exchange Traded Fund in September 2020, SBI ETF IT and SBI ETF Private Bank in October 2020 and Axis Banking ETF and NIPPON INDIA ETF NIFTY CPSE BOND PLUS SDL – 2024 in November 2020 respectively.
Having said that, awareness about Exchange Traded Funds (ETFs) is still quite low in India, these funds are gaining traction amongst investors over the last few years.
In the last 5 years, the mutual fund industry assets under management (AUM) in ETFs have grown at a CAGR of more than 100%.
The assets under ETFs as on November 30, 2020 stood at Rs 2.47 lakh crore (AUM), up Rs 71,000 crore or 46.22 per cent more than the same period in 2019 in India.
I hope you have understood the Basics of ETF and will soon start investing in ETF and also going to use moneycontain ETF Calculator time to time to know the expected returns from the investment.
If you are a beginner in trading and investing, please read this amazing guide on How stock market works in India?
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Note: Please do your own research and make investment. Moneycontain will not be responsible for any of your losses at all. The point made is for educational purpose only and intended to give information. All investments are subject to risks, which should be considered prior to making any investments.