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What is an Exchange Traded Fund (ETF)?

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What is an Exchange Traded Fund (ETF)?
An ETF is an open-ended Mutual fund scheme with an objective to track and reflect the performance of its underlying index. It achieves this through a passive investment strategy of investing in the same stocks and in the same proportion as they constitute the underlying index.

What are the advantages of an ETF?
Investments in ETFs are highly liquid as they are held through a Demat account and can be traded on a stock exchange like direct equity shares. Also, being passively managed, they have lower expense ratios in comparison to actively managed Mutual Funds.



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This post first appeared on Prajna Capital - An Investment Guide, please read the originial post: here

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What is an Exchange Traded Fund (ETF)?

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