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 hovers around 1.0700, eyes on US first-quarter GDP data
EUR/USD hovers around the 1.0700 psychological level on Thursday during the early Asian session. The modest uptick of the major pair is supported by the softer US Dollar. Later in the day, Germany’s GfK Consumer Confidence Survey for April will be released.
GBP/USD snaps the two-day winning streak above 1.2450, eyes on US GDP data
The GBP/USD pair snaps the two-day winning streak near 1.2460 amid the modest rebound of the US Dollar on Thursday during the early Asian session. The release of the US Gross Domestic Product for the first quarter will take center stage on the day.
USD/JPY finds its highest bids since 1990, near 155.50
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, testing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming Japanese intervention risks. Focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Editors’ Picks
AUD/USD hovers around 0.6500 amid light trading, ahead of US GDP
AUD/USD is trading close to 0.6500 in Asian trading on Thursday, lacking a clear directional impetus amid an Anzac Day holiday in Australia. Meanwhile, traders stay cautious due ti risk-aversion and ahead of the key US Q1 GDP release.
USD/JPY finds its highest bids since 1990, near 155.50
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, testing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming Japanese intervention risks. Focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold price lacks firm intraday direction, holds steady above $2,300 ahead of US data
Gold price remains confined in a narrow band for the second straight day on Thursday. Reduced Fed rate cut bets and a positive risk tone cap the upside for the commodity. Traders now await key US macro data before positioning for the near-term trajectory.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price. Coupled with broader market gloom, INJ token’s doomed days may not be over yet.
Meta Platforms Earnings: META sinks 10% on lower Q2 revenue guidance Premium
This must be "opposites" week. While Doppelganger Tesla rode horrible misses on Tuesday to a double-digit rally, Meta Platforms produced impressive beats above Wall Street consensus after the close on Wednesday, only to watch the share price collapse by nearly 10%.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
Discover how to make money in forex is easy if you know how the bankers trade!
5 Forex News Events You Need To Know
In the fast moving world of currency markets, it is extremely important for new traders to know the list of important forex news...
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and...
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.