ETF Investing for Beginners | Exchange Traded Funds | How to Invest in ETFs | ETF vs Mutual Funds

► 22,000+ readers have joined my FREE Investing Newsletter at shankarnath.com
Exchange traded funds or ETFs are investment funds that track an index, bond, commodity, or basket of assets and are traded on exchanges much like stocks. In India, ETFs were introduced in 2002 but gained significant traction after the Indian government recognized them as an asset class in 2013. In this video, I present a beginner's guide to ETFs with a focus on the benefits of using ETFs, how I use ETFs, the concerns/drawbacks, expense structure of ETFs, types of ETFs, costs, liquidity, tracking error, impact cost etc. I also look at the comparison of ETFs with mutual funds esp. index funds and why it is important to considering ETFs as a viable investment option while being mindful of potential risks and costs
👉 Video Chapters:
00:00 Growing Popularity of Exchange Traded Funds
01:28 What is an ETF?
02:38 Benefits of Exchange Traded Funds
06:35 Key Concerns & Drawbacks of ETFs
11:21 Difference between ETFs and Mutual Funds
13:34 How do I use an ETF?
15:53 How to Invest in an ETF?
17:15 Application of Dividends in ETFs
18:06 ETF Taxation
#exchangetradedfunds #etf #etfs #passiveinvesting
Disclaimer: I am not a SEBI registered investment advisor or research analyst. I am not registered with PFRDA or IRDA either. The content posted on this platform is purely for educational purposes and none of it constitutes investing or trading advice. Viewers should do their own research and diligence before investing or acting on the information presented. Some of the links I have posted in the video, the description, the comments and other related resources might be affiliate links

[@jasmanjeet]

I have just discovered this channel and watching some of this videos as a beginner investor, i can say this is a seriously underrated channel.

[@shankarnath]

Thank you!

[@JishnuChatterjee]

THE video I was waiting for long. Thank you for this great video. An eye opener for many.

[@shankarnath]

Thank you very much Jishnu, I'm glad you liked it

[@ojaswinimalukar]

This topic was a long awaited video from you.,.Thanks

[@shankarnath]

Thx for your patience

[@maheshmoharir9314]

Thank you for long awaited video from you.

[@shankarnath]

Thank you for your patience

[@vishalgautam-ky2oo]

Sir thank you so much . Give better understanding about ETF

[@shankarnath]

Most welcome

[@darshanjain3004]

You are a gem 💎 Thanks for making learing so easy ❤

[@shankarnath]

Thanks! I'm glad you like my work

[@pranavraval3352]

Thank you Shankar, just recently i shifted my bias from ETF and started investing in similarly priced or even lower cost index fund (considering ETF price fluctuations vs actual NAV and also the other charges like STT, stamp duty, etc) Maybe in a next video it would be very nice to see how the returns of ETF compare with index fund over a long period given that ETF price (at time of purchase) during market hours may be different than the actual NAV of the ETF, whereas in case of index fund there are no such discrepancies.

[@shankarnath]

Thanks for the suggestion

[@janmejaymohanty9454]

Pranav Impact cost is the hidden cost as rightly said by Sankar sir which differentiates etf from index funds, inflow and outflow impact also takes toll on unit price in index funds which is not in case of etf. Moreover,NAV is wrong term you used in case of etf unlike index funds.

[@naveenkumarsharma2716]

Very informative presentation on ETF . Thanks Mr Shankar 🌸🌸

[@shankarnath]

So nice of you. You're most welcome

[@aks0765]

You are simply great. Very very honest opinion

[@shankarnath]

Thank you very much! 🙌

[@pardeepkansal7550]

Very informative as always...thourogh study on topic and command on subject 👏

[@shankarnath]

Thank you. Glad you liked it

[@nikhilpachauri5761]

Quite a good video,, thanks for sharing this,

[@shankarnath]

My pleasure. Glad you enjoyed it

[@aceani]

Epic! Well explained again Shankar.

[@shankarnath]

Thanks

[@prathyushap6042]

Thanks very much nath sir.. Very much awaiting for this video that too mainly from you.. Recently very much obsessed with your videos that too in the extent I'm searching for everything I came across (reg investment related topics) from your channel to get your views on that particular subject.. Thank you sir.. Please do a video for beginners in investment too..

[@shankarnath]

Most welcome and thanks for the suggestion

[@vasanthihariharan7384]

Excellent...explanation on ETF

[@shankarnath]

Glad you liked it!

[@manishssawant]

Much much needed video...... thanks #shankarnath ❤

[@shankarnath]

Most welcome!

[@JatinV1]

What an amazing, comprehensive video 💯💯🙌🙏

[@shankarnath]

Glad it was helpful!

[@ramasisir]

Again Great Work Sir!! Really Liked this insights, especially on Inflow and Outflow impact on ETF vs index funds part. I will think about adding ETFs as a part of my portfolio. I wish you to have more subscribers. 🙏🙏🙏

[@shankarnath]

Thank you for your kind appreciation. Glad the video was helpful!

[@ravijag73]

Shankar excellent info. Sharing with my team👍

[@shankarnath]

Thanks for sharing

[@sanyamnagpal4748]

Sir your English speaking skills and vocabulary are mind blowing, please suggest some tips on that too. I was more focused on the way you are speaking.

[@shankarnath]

Hello, it all comes down to practice. The more one writes, the better he/she gets at it. The same applies to speaking.

[@satheshkumar5870]

Good & Clear Explanation 📸

[@shankarnath]

Thank you 🙂

[@prasadpasala1340]

As usual, lucid and excellent explanation of complex stock market topics, by Sri sankarnath.

[@shankarnath]

Thank you

[@VJeducation999]

Very knowledgeable!

[@shankarnath]

Glad it was helpful!

[@duraisamya3068]

Very useful information about investment in MFs and I have invested in Mirae Assets Nifty small cap 250MQ100 MF, after seeing your earlier Video, Thanks

[@shankarnath]

Most welcome!

[@yoursram]

Kudos to your efforts. Thanks for sharing the knowledge. Keep it up :)

[@shankarnath]

My pleasure

[@prashanthbelur169]

Dear Shankar, As always the content is top notch and very informative. Keep creating such content to create Financial Awareness.

[@shankarnath]

Thank you so much Prashant for the encouragement

[@ravichandar5426]

Thanks so much for this video

[@shankarnath]

You are so welcome!

[@MrBharathirajesh]

Excellent presentation Very genuine effort

[@shankarnath]

So nice of you. Thank you!

[@swamidasdalvi4845]

Your videos are amazing. You might want to put out a video on the making of ur videos as your narration and content is off the charts. 👍👍 Didn't really get the explanation behind impact cost and why inflow/outflow does not impact ETFs. Goes to basics of how an ETF operates vs an index fund I guess which I'm a bit short on.

[@shankarnath]

Thanks for the suggestion & feedback

[@bluestone019]

Thank for the nice video.

[@shankarnath]

Thanks for watching!

[@ajithnair3225]

Excellent one....

[@shankarnath]

Glad you liked it

[@mysoregopinathshantanu8800]

good topic.

[@shankarnath]

Thanks!

[@pkprprempavankumar8749]

Wow.. Finally u made weaKend a weeKend... Thanks ji for brining another wonderful video. Ji, is there a way to track quantum of exposure mutual funds have to a particular share? Thanks in advance for your help :-)

[@shankarnath]

Most welcome. I don't remember specifically which platform, but I've seen 2-3 platforms offer mutual fund exposure to specific shares. Pls check out a few of them.

[@user-lr7du9cy4m]

Thanks a lot!

[@shankarnath]

Welcome!

[@durgacharanrath9498]

Thank You.

[@shankarnath]

Welcome!

[@sohan1976]

The most important advantage is as you mentioned the NAV of MF is beyond our control and doesn’t feels right any time you invest in it. ETFs are far better with less expense ratios and no lockin periods. Hope the Fund houses will introduce more ETFs than MFs in future.

[@acsmaniz]

Good One

[@shankarnath]

Thanks!

[@thedefender2191]

Can you please elaborate on balanced etf.i have not seen till date

[@shanthanalur4714]

Very informative, thank you. Is it possible to show us the different well performing ETFs performance over time and also what stocks are held in those ETFs, thanks

[@shankarnath]

Thx for the suggestion. You can extract the list of top ETF performers from a platform like moneycontrol.com and check the constituents there.

[@surjannegi448]

Mr shankar, grt vdo as always.hats off to u. Can u pl make an elabotate vdo on investing in US stocks/etfs..

[@shankarnath]

Thanks for the suggestion

[@SanjayKumar-mk5hl]

I want such vedio,,, thanks thanks,,, a lot

[@shankarnath]

Most welcome

[@sanpra1981]

Thank You

[@shankarnath]

You're welcome

[@coldstone87]

Excellent video shankar as always. I have 2 questions though: 1. If there are no buyers i have heard market makers usually buy off our sell order at the current ETF rate. How true is this market maker theory? 2. What is this FoF of etf and why should one go for it? Is FOF NAV value is end of the day value of ETF?

[@shankarnath]

1. It's generally true 2. FOF is a mutual fund scheme wherein the ETF is the primary constituent. E.g. ICICI Prudential Silver ETF FoF's major constituent is ICICI Prudential Silver ETF (presently 99.91%)

[@rodge_interio]

Shankarji, your video insights are very useful. Can you make video on how to select mutual funds or ETF and also list a few with comparison on tax savings with indexation benefit. as we know investment not more than 65% equity and 35% debt get indexation benefit. but this are funds and etf are hard to find.😅

[@shankarnath]

Thanks for the suggestion. You can try valueresearchonline.com to find balanced ETFs.

[@abhinavsingh-fn2vz]

The only person who spreads real knowledge

[@shankarnath]

Thank you very much!

[@mahi_13189]

@shankarnath: quality content as always! 👍. I know there is a striking difference between a small case and an ETF. But, can you pls do a video on what would be the rationale in picking between two for a long term investor? Asking this in the context of this small case: "Top 100 Stocks" by Windmill Capital. Basically they have just added two ETFs (nifty 50 and Junior bees) under it and routinely update the weightage between two during their rebalances.

[@shankarnath]

Thanks for the suggestion

[@ajayverma1155]

Very well explained... thanks...

[@shankarnath]

Glad you liked it. Thanks!

[@nareshy89]

Looking for this video since last year. Thank Sir you gave us a complete guide about etf/ index fund. I have a little confusion about taxation part. As the person who did received short term capital gain on his capital during the year then his gain is taxable @15% of the profits. My question is that if his taxable income is less than the taxable limit still he is liable to pay @15% or not?

[@shankarnath]

Most welcome. Kindly consult a tax advisor for specifics

[@satishrana9735]

shankar ji , Please make a video on Leveages , how to build Leverages to buy shares and pay off the leverages gradually. Could not find it anywhere. . Please take it ... This is very essential . I know you read all comments. I follow up hence have asked this question.

[@shankarnath]

Thanks for the suggestion

[@baskarchockalingam2421]

after a long time,basic video I can understand 😂😂😂..thank u bro

[@shankarnath]

Most welcome

[@ashishlukka]

Sir, at 12:08, the part with creating new shares when there are buy orders is not clear. Does it mean that somehow etf are also 'derivative' in some aspects?

[@shankarnath]

Pls read these two articles: 1. www.schwabassetmanagement.com/content/understanding-etf-creation-and-redemption-mechanism 2. www.nseindia.com/products-services/etfs-creation-redemptions

[@excel-k-sir]

a dedicated video on how to use Chart Ink for fundamental analysis will be great

[@shankarnath]

Thanks for the suggestion

[@user-uj1es9sj3k]

please make a video on SME companies and best listed SME companies on the exchange please !!

[@shankarnath]

Thanks for the suggestion

[@dandgebharatkumar6804]

Kindly do a video on best ETF'S to invest

[@shankarnath]

Thanks for the suggestion

[@TheViralSneeze]

Another advantage of ETF is, consolidation of assets. You don't need separate tracking for mutual funds & stocks you hold (& saving annual maintenance charges on COIN, though Zerodha had abolished these monthly charges of ₹50/month later) Shankar ji, would await your data backed educational vdo on international REIT investment options

[@shankarnath]

Thanks for the suggestion

[@kiddotales6718]

Sir, conclusion pls which is best index vs etf when considering taxation?

[@shankarnath]

Can you share your own research with re: taxation on index fund & ETF? This way I can comment on it as I'll know the context

[@excel-k-sir]

bingo what a timing :)

[@aadeshbakale6698]

Sir kindly make a conclusion in next video. Eg. Will it be good to buy 50 lakh worth ETF lumpsum or we should go with Index funds? What will be more charge efficient?

[@shankarnath]

Thanks for the suggestion

[@JVadvise]

Just like your presentations, your write-up's are also top-notch! It's been a quite long since your newsletters hitting our in-boxes. I'm keenly waiting for your next newsletter sir! If there's no new special situations, at least an update on the relevancy of earlier discussed situations in current market conditions would be very helpful.

[@shankarnath]

Thank you for your patience

[@pradeepkumarmoghe4551]

Sir, the daily trading volumes in Pharma, IT, Banking, Auto, and Real Estate ETFs are usually quite low. There is big buy-sell spread. Plz guide. Thanks

[@shankarnath]

I'm sorry, what's the question? It's not clear

[@joshiprabhu]

Do we have to pay STT on index funds also? Please clarify.

[@haimantide1827]

Yes All others also

[@gamedevelopmenttutorial]

Another advantage is that ETFs are also pledgable.

[@joshiprabhu]

Mutual funds can also be pledged.

[@Undertaker_ka_bhai]

What's that?

[@ravijag73]

Only if in demat format right?

[@gamedevelopmenttutorial]

@@joshiprabhu a very few brokers allow that.

[@drmrahul]

zerodha allows

[@swanandvedpathak9495]

Long awaited Topic , thanks for sharing this knowledge

[@shankarnath]

Thanks for your patience

[@hemalburu9687]

Sir govt employee ETF kar sakta hai??

[@abhishekb5002]

If I sell Nasdaq 100 ETF after 12 months holding, the applicable tax would be 10% LTCG or as per my income tax slab?? Please guide.

[@guythomas4335]

Tax slab

[@privacyowl]

As per tax slab since this is not an Indian equity investment

[@apurbamazumdar968]

Kindly explain why in the case of ETFs the quoted price is always higher than the NAV?

[@shankarnath]

The market price will typically exceed the NAV if the fund is in high demand with low supply. This is what is currently happening with international ETFs after the SEBI instructed mutual funds to halt fresh subscriptions in their overseas ETFs from April 1 onwards

[@vishalgautam-ky2oo]

Dear Sir, please make video on REITs and special about foreign country like the USA where real estate is more regulated and how to invest them from India.

[@shankarnath]

Thanks for the suggestion

[@janmejaymohanty9454]

Sir kindly make video of etf vs index fund

[@shankarnath]

Thanks for the suggestion

[@sandeepbardoliwala6992]

Pls make video on government capex related ETF. #shankarnath

[@shankarnath]

Thanks for the suggestion

[@vineetunny6719]

How does nifty etf pay dividend and what is taxation. Thx

[@santoshkenguva4326]

Dividend if there, reinvested

[@vineetunny6719]

@@santoshkenguva4326 so no taxation at buyer end for dividend payout. Only capital gain is applicable

[@mandarrane]

Can you cover tax free bond and how toninvest in them?

[@shankarnath]

I can try. Thanks for the suggestion

[@shanthimurugan9981]

can you pls list the balanced etfs currently available? So far, i have known abt equity, debt, silver & gold etf apart from few international etf...

[@malleswararaomaguluri6344]

Suggest best etfs sir

[@shankarnath]

Thanks for the suggestion

[@gollapalliabhishek2229]

l've been thinking of purchasing icici nifty alpha low vol etf and later while checking the app I've found that the same icici nifty alpha low vol etf fof has a much lower expense ratio. The difference is huge .42% vs .1% Can you explain why? Is the expense ratio of etf fof is really .1% or am I missing something. same goes for Tata Nifty India Digital ETF Fund of Fund - Direct Plan - Growth which is 0.07% but Tata Nifty India Digital ETF's expense ratio is 0.40%.. are there hidden expenses with fof else why would people even go for etf or mutual funds if they can get fof for that much less expense ratio... am I missing something...

[@englishsongsothers8561]

. 42+.1=.51 in fof but in etf stt sebi turnover fee actually etf & fof cost remain same

[@gollapalliabhishek2229]

@@englishsongsothers8561 thank you 🙏🏻

[@samirmasrani9810]

Ur view on liquid case by zerodha?

[@shankarnath]

I haven't tried it. But generally liquid ETFs have the lowest tracking error and impact cost .. so I guess Zerodha or most liquid ETFs should be similar and efficient

[@maheshmoharir9314]

Etf expense ratio is less but platform like HDFC Securities charges Rs. 25/-as a brokerage which becomes 2.5% for purchase worth 1000/-Rs.Can anyone suggest lower charges platform??

[@hindubyheart]

Any discount broker... They charge Zero since you are taking delivery. Only STT and govt taxes are payable

[@AnishKrisna]

is there website or app to calculate ETF returns?

[@shankarnath]

Most of them offer it. Valueresearchonline.com & moneycontrol.com are two platforms I can think of

[@sdembla9]

Is there something like ELSS or tax saving ETFs?

[@shankarnath]

I am not sure but pls read this and verify: www.livemint.com/money/personal-finance/is-cpse-etf-a-good-tax-saving-option-under-elss-category-1563214720833.html

[@user-ot7bo8zd9p]

Hi Shankar, thx for another nice video. How international ETFs are works, US markets are almost off when our markets are on. How we can buy international ETF in that case .

[@shankarnath]

Thank you. I'm not aware of how international ETFs are operationalized .. I'll circle back if I receive more information on this.

[@mahnazsingh6887]

Sir u had told you will be launching paid channel soon. When is it likely to happen as I want to have a word with you 1-2-1 for one or 2 doubts that i have

[@shankarnath]

Hi, I won't be launching a 1:1 product anytime soon. If you have a query, pls post it here. I'll try to answer it

[@mahnazsingh6887]

@@shankarnath sir I wanted to invest in parag parikh flexi cap for quite some time but its AUM of 64k cr is what makes me lil jittery. Should i be worried of this huge AUM? My worry is that they may have difficulty switching stocks or may be panic selling might result in some issues

[@SuyogKulkarni21]

❤

[@rajeevmandirutta9616]

How is ETF wrt dividend declared or bonus issues by underlying companies….will a person holding RIL through N50 ETF get the proportionate shares of Jio Financial Services.

[@AvinashCheedella96]

Same doubt for me.

[@shankarnath]

The dividend part was covered in the video. Same principle applies for bonus shares

[@achiranshugarg3164]

Only investing who helps in understanding market instruments in easy manner rather flaunting his wealth, intelligence.

[@shankarnath]

Glad you liked my work

[@iFrozenSkull]

Currently doing a SIP in motilal mon100 ETF from 3 years. But now that there are no indexation benefit and taxed at tax slab. Is it a good idea to continue it? I am looking to invest in this for minimum 5-10 years. So hopefully if the government changes the rules to debt fund ETF then it's good.

[@swapnilp5823]

Do analysis the strategy of Mahesh chandra kaushik - ETF ki dukaan on your KZbin channel.

[@shankarnath]

Thanks for the suggestion

[@girishtaparia6327]

I have been investing and trading in ETF for more than 5 years now. I wish if there could be ETF for commodities like crude, steel, iron and even for Bitcoins, usd/Inr etc. as we have for silver & gold, it could help investors to get a less risky exposure while reaping their benefits.Thank you.

[@jatinderbhatia996]

I think you should share your etf journey for learning purpose. either trading or just investing . any insight about rebalancing. and more.

[@moodles5348]

So how is it going, the etf journey, so far?

[@girishtaparia6327]

It has been a good learning journey so far.

[@moodles5348]

Learning is good but what about returns, are they good and reasonable?

[@girishtaparia6327]

Yes the returns were good and that is why I wish if we could have ETF for commodities, forex and even cryptos .

[@Dushyantgiri]

Wel jo one talk about liquidity in etfs, you cant invest like mutual funds and liquidate them, also nav of etf vs price of etf ( error ) born by investors, doenst make eft very good choice yet excep for traders or for pwople who are traders, or choose only in vert few etfs..

[@lordrdx666]

Best line in the video - kuch toh hai!

[@shankarnath]

Thank you Ravi. Kuch toh inaam mila :)

[@aathik89]

Sir i am planning to buy silver for long term and confused inbetween hdfcsilver etf and hdfcsilver etf fof. Can you please mention the difference of investing in both.

[@shankarnath]

Sorry, I haven't analysed these two schemes. Will certainly circle back if I do review these.

[@AbhishekSharma-qp2xt]

Had a query….Many ETFs mentioned in the video cannot be found on Zerodha app…. like international exchange ETFs…. Where do we access all these ETFs….

[@shankarnath]

I'm surprised to hear that. Can you reply back with 3-4 such ETFs that aren't visible on the Zerodha app?

[@AbhishekSharma-qp2xt]

@@shankarnath Thanks for responding Shankar! So… apparently it was not showing yesterday ( maybe internet problem). However, ETFs like M.Oswal Nasdaq Q50 ETF, Mirae Asset S&P 500 Top 50 ETF, and Mirae Asset NYSE FANG+ show no transactions as well as there is no chart available to see the price trend of these ETFs on Zerodha…. Am I missing something here….

[@shankarnath]

The charts are very much available. MONQ50, MASPTOP50 and MAFANG all have many months of data

[@AbhishekSharma-qp2xt]

@@shankarnath The weird part is if we search typing MAFANG…. we get the charts and stuff….. i was trying by typing the entire ETF name…. and the search results were not accurate may be…. Thanks Shankar for your prompt response and help…. Appreciate it!

[@saumitrachakraborty9794]

A request to you sir. Please make a video on the number of demat accounts I may open, logically. I have two - one for long term investment and the other for swing trading. But does it make any sense to open another demat account, just for creating a portfolio of ETFs?

[@shankarnath]

Thanks for the suggestion

[@sn17156]

Please let us know the taxation on ETF which invest in international fund

[@shankarnath]

I'm not sure, sorry! Request you to consult your tax advisor on this matter

[@divyasharma6389]

sir i didnt understand " Index funds are directly impacted by inflows and outflows" but etf are not..... plz explain in detail

[@shankarnath]

Hello. Pls read up a bit more about it on the Internet, may I was not able to explain it in the video due to lack of time or the theoretical nature of the transaction.

[@shamivlog1902]

Sir, I have a doubt, but it's not clarified. Suppose I'm investing 1 crore in UTI Nifty 50 Index Fund for 10 years, and my expense ratio will be 0.21% per year. Over 10 years, it will amount to 2.1% because I incur the expense ratio every year. In contrast, in ETFs like NiftyBEES, the expense ratio is 0.04%, and over 10 years, it would be 0.4%. Additionally, other charges like STT, GST, etc., are one-time during buying and selling. Let's assume it will be 0.6%. So, the total expense ratio for ETFs over 10 years will be 1%, while in the index fund, it is 2.1%. Can we save 1.1% if we invest in ETFs instead of index funds? Please clarify for me.

[@jatinderbhatia996]

@shankarnath please clarify

[@mandarp9472]

Sir, Why SEBI does now give permission for Leveraged ETFs like iQQQ Nasdaq 100?

[@shankarnath]

Sorry, I have no idea

[@mandarp9472]

@@shankarnath Ok.

[@sunil.shegaonkar1]

Hello Shankar, I have a simple question here (as I do not generally trade ETF & MF): Thank you. Suppose, there are many investors pouring their money into certain ETF (or mutual fund), will the fund manager want to increase investment amount of AUM ?? Conversely, if most people start exiting their position in ETF or mutual fund, will this cause Fund managers to decrease investment amount of AUM?

[@narendragautam1457]

Little more input is required .I Hope that there will be one more video

[@dips2805]

Is it wise to use buy on dip strategy on niftybees or bankbees?

[@DivyanshiGupta-yc6zn]

Sir hindi mein ye video banaiye

[@shankarnath]

Thanks for the suggestion

[@sanjaydhanuka9287]

Your last video on our Defence Sector was some 8 months ago which I chanced to see today which I liked very much. My earnest request to bring on a fresh new video on the sector with inputs on the major 10 to 15 manufacturers.

[@shankarnath]

Thanks for the suggestion. I'll try

[@x_man007]

Nippon has high expense ratio even after such large aum