Explained: What parameters should you consider when investing in ETFs

An alternative to mutual funds are ETFs. For those unaware, an Exchange Traded Fund (ETF) is a type of investment fund which trades on the stock exchanges. An ETF can be bought or sold throughout the day as the price keeps changing, similar to stocks.

As an Indian investor, the concept of investing in overseas equities has started gaining prominence only recently. Until then, investing overseas was confined only to a few large fund houses. For Indians, investing would mean allocating their funds to stocks, real estate, gold and mutual funds. Very few have had the awareness and the willingness to invest in ETFs or Exchange Traded Funds. Traditionally, the most popular route to invest in is through mutual funds. A mutual fund is a professionally managed investment fund that pools money from investors and the proceeds are used to buy stocks or bonds. Mutual Funds are run by Asset Management Companies (AMC). The goal of the manager is to outperform the benchmark.