1. Definition
An Exchange Traded Fund (ETF) is a basket of securities that tracks an index (like Nifty 50), sector (Auto, Bank), or theme (Dividend). You buy it on the stock exchange just like a stock, but you instantly own dozens of companies.
2. Key characteristics
- Real-time trading: Prices move throughout the day; you can place limit or market orders.
- Low expense ratio: Most Indian index ETFs cost 0.05% – 0.3% per year compared to 1.5% for active mutual funds.
- Transparency: Holdings are published daily so you always know what you own.
- Diversification: One ETF unit can represent 50 or more companies, reducing single-stock risk.
3. Why ETFs suit long-term SIPs
Because ETFs mirror the index, you don’t need to research each company. You simply keep buying units every month and benefit from India’s economic growth.
Tip: Stick to high-liquidity ETFs (NiftyBees, BankBees, etc.) so your orders fill instantly at fair prices.
4. Where SmartETF fits in
SmartETF uses the same ETFs but adds an algorithm that buys extra units during market dips. You keep the low costs of ETFs while capturing better entry prices.