Mutual Funds Units and Exchange Traded Funds (ETF)

 

Mutual Funds Units:

 

Who Issues The Mutual Fund Units?

Mutual Funds issue it.

Who Can Invest In Mutual Funds?

Institutions and Individuals will plan and invest in mutual funds.

What Is The Medium Of the Issue?

Direct issuance by mutual funds and Stock Exchange is done.

Which Is The Regulatory Body?

SEBI & RBI is the regulatory body.

Mutual Funds (MFs) are investments that group together the money contributed by the investor. The fund invests in a portfolio of securities that mirror the common investment purpose of the investors. The units proceeded by the fund represent every investor’s share.

The value of the units, called the Net Asset Value (NAV), constantly changes to mirror changes in the value of the portfolio held by the fund.

MF methods can be categorized as open-ended or close-ended. An open-ended scheme offers the investors an option to buy units from the fund and sell the units back to the fund at any time.

These methods do not have any fixed maturity period. The units can be bought and sold anytime at NAV-linked prices.

The unit capital of closed-ended funds is fixed, and they sell a specific number of units. Units of closed-ended funds can be bought or sold in the Stock Market, where they are mandatorily listed.

 

Exchange-Traded Funds (ETFs)

 

Who Issues The Exchange Traded Funds?

Mutual Funds issue the ETFs

Who Can Invest In ETFs?

Institutions and Individuals can invest in ETFs.

What is the medium of issue?

Direct issuance by mutual funds and Stock Exchange is done.

Which is the regulatory body?

·       SEBI &RBI regulates the ETFs

·       Exchange-Traded Fund (ETF) is an investment medium that invests funds collectively by investors to follow an index, a commodity, or a basket of assets.

·       It is similar to an index fund in that its portfolio mirrors the index it tracks. However, unlike an index fund, the units of the ETF are listed and traded in Demat form on a stock exchange. Their price alters continuously to mirror changes in the index or commodity prices.

·       ETFs provide the diversification benefits of an index fund and the service to sell or buy at real-time prices, even one unit of the fund.

·       Since an ETF is a reflexively managed portfolio, its expense ratios are typically lower than a mutual fund scheme.