What It Means
An ETF (Exchange-Traded Fund) is a fund holding a basket of securities — often the stocks of an index like Nifty 50 — that trades on an exchange throughout the day, just like an individual stock.
How It Works
Unlike a mutual fund, which is priced and transacted once a day at its NAV, an ETF's price moves continuously during market hours based on real-time buying and selling, the way any listed stock's price does. You buy and sell ETF units through a regular trading account, the same as you would a stock, and each unit typically tracks the value of the underlying index or basket closely, minus a small expense ratio charged by the fund house.
Common Variants
Index ETFs (tracking Nifty 50, Sensex, or sector indices) are the most common in India, but gold ETFs (tracking gold prices without holding physical gold) and international ETFs (tracking foreign indices) are also widely available.