Brandon Wendell, CMT
Brandon Wendell
Exchange Traded Funds (ETFs) have long been used in the United States as a means for investing in multiple securities without the higher fees involved with mutual funds. An ETF is a tradable security that represents ownership in a basket of shares in multiple companies. The ETF is similar to a mutual fund in that you get to invest in more than one company with a smaller capital outlay.
The problem with Indian ETF’s has been twofold. First, there was a limited offering of different ETFs. There are only 33 ETFs available for trading in India. In the US there are over 500! The most well known ETFs are the Gold BEES. Secondly, the volume in these ETFs has been relatively low as investors and brokers were not educated in how to use them and chose mutual funds instead.
This may change with the recent entry of Goldman Sachs into the Indian markets. Goldman, one of the largest market players in the United States, did not have any interests in ETFs. They were primarily a large institutional trading firm. They started their own mutual fund unit in India in 2008 but as of March 2011, they bought Benchmark Asset Management Co. This purchase gave them ownership of the largest selection of ETFs in India.
As you can see by the picture below, the Nifty BEES ETF is weighted very similarly to the Nifty Index itself. The performance should mirror the index without the higher costs of a mutual fund.
You can buy a share of the ETF for Rs. 608.61 and have ownership in shares in all 50 Nifty stocks.
Even the Indian government is entering the ETF market. They have announced a bidding process for mutual fund companies to create an ETF that would allow people to invest in PSU’s. The bids must be submitted by 24th January.
With Goldman’s involvement in the market and more educational opportunities for investors, the ETF market share should continue to grow. This will offer a great way to diversify a portfolio with lowered costs. Since the ETFs are traded as stocks are, they also allow trading opportunities once the volume is sufficient. This is a market to watch in the upcoming year.
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD drops below 1.0800 as USD gathers strength
EUR/USD came under renewed bearish pressure and dropped to a fresh three-week low below 1.0800. Following the mixed macroeconomic data releases from the US, the cautious market stance helped the US Dollar find demand and weighed on the pair.
GBP/USD falls to fresh weekly low below 1.2600
GBP/USD turned south in the American session and declined to a weekly low below 1.2600 on Tuesday. Following a quiet European session, the US Dollar started to gather strength and forced GBP/USD to extend the daily slide.
USD/JPY remains capped below 147.45 ahead of US data
Dollar recovery fails at 147.45 and keeps bears in charge. Speculation about Fed cuts in March is limiting USD’s upside attempts. Hopes of some BoJ monetary policy normalisation support the Yen.
Editors’ Picks
EUR/USD drops below 1.0800 as USD gathers strength
EUR/USD came under renewed bearish pressure and dropped to a fresh three-week low below 1.0800. Following the mixed macroeconomic data releases from the US, the cautious market stance helped the US Dollar find demand and weighed on the pair.
GBP/USD falls to fresh weekly low below 1.2600
GBP/USD turned south in the American session and declined to a weekly low below 1.2600 on Tuesday. Following a quiet European session, the US Dollar started to gather strength and forced GBP/USD to extend the daily slide.
Gold stays under bearish pressure, trades below $2,020
Following Monday's decline, Gold struggled to stage a convincing rebound and retreated below $2,020 in the second half of the day on Tuesday. Although the benchmark 10-year US Treasury bond yield is down more than 1%, renewed USD strength doesn't allow XAU/USD to limit its losses.
Bitcoin price eyes $45,000 target ahead of BTC halving in April 2024
Bitcoin price climbed past $41,000 as BTC holders await green light for Spot Bitcoin ETF. BTC price rally to $45,000 is likely prior to the fourth halving event, according to a crypto analyst.
NIO shares jump more than 5% as JOLTS data falls
Nio (NIO) stock jumped 5.5% on Tuesday morning to $7.72 after the Chinese electric vehicle (EV) manufacturer released third-quarter earnings that showed sales of higher margin SUVs surged 258% from the most recent quarter and 64% from a year ago.
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