How do you make money running an ETF fund?
ETFs and Mutual Funds are much similar. Mutual fund investors are likely to invest in ETFs. The full form of ETF is Exchange Traded Fund (ETF). It brings more safety and sustainability to the traders. That’s why it becomes more popular among investors. Many investors don’t know about ETFs and how to make money from ETFs.
So in this article, I will discuss how you can earn from ETFs and how can invest in it. But first you have to know what is an ETF and how does it works?
What is an Exchange Traded Fund (ETF)
Exchange Traded Fund is the full form of ETF. It is similar to stocks or mutual funds as I earlier said. ETFs are traded on stock markets through any national stock exchange. ETFs are likely mutual funds, that pools the assets from different investors and invest their money in various sectors like stocks, currencies, and different debt securities. Thus it makes a diversified portfolio, that is more effective in any market condition. Investors can trust on ETFs more than stocks. Stocks can move on down wards by any bad news or any international market movement but ETFs will sustain your position and can work positively because it invests in various sectors.
The diversification makes it safer and more profitable. So the investors can earn from ETFs.
Make Money From ETFs
ETFs are bought at a certain price from the market and sell it when the price gets higher. The investors can earn the profit which is the difference between the selling price and purchasing price of an ETF. Its buying and selling are likely to stocks which is traded during the trading hours.
An exchange traded fund invests in stocks, bonds, securities, or commodities. The traders will pick the price and purchase at a certain point and when the price increases sell it. If any of the stock’s price increases proportionately the ETF’s price increases and when the price comes down the ETF’s price falls. The ETFs invest in the bonds, securities and commodities such as gold and silver and it reflects on the market situations or the index movements such as NIFTY movement.
The ETFs will work on depending upon the performance or it’s value and the management company. The management companies can be dividable into two types such as active and passive managers. The active managers assign the investors in stock markets and invest their money with a calculated risk. Their main target is to make a diversified portfolio for getting a better returns. They do research and analyze the market and other stock’s companies to invest in.
On the other hand, the passive managers invest in bullish manners. They identify the growing charts of the stocks that are making good returns and investment in those stocks.
Although, the profit from exchange traded funds depends on the type of ETF. It is important that an investor should invest in the preferred type of exchange traded fund. The investors can decide their preferred sectors and invest on them accordingly.
You can also earn from the dividend paid to you. If you invest in any dividend stocks, you will receive the dividend funds from the stock’s company.
Different Types Of ETFs
Before investing you can analyze the types of ETFs. Each ETF works in different way as their stocks or commodities run. So you should choose your preferred ETF and invest in them.
Summarizing the types of ETFs
- Leveraged ETFs
- Geographics ETFs
- Commodities ETFs
- Short ETFs
- Currency ETFs
- Sector and industrial ETFs
- Stock Index ETFs
To invest in the stock market you need to open a broker account online.
Best ETFs to Invest in 2022
| NO. | ETFs NAME | TOTAL AUM (CR) |
|---|---|---|
| 1. | Motilal Oswal NASDAQ 100 ETF | RS. 31048 |
| 2. | UTI Sensex EXCHANGE TRADED FUND | RS. 2,23,499.21 |
| 3. | Nippon ETF Liquid BeES | RS. 5549.08 |
| 4. | HDFC Gold EXCHANGE TRADED FUND | RS. 4,39,939.45 |
| 5. | SBI ETF Sensex | RS. 6,43,285.27 |
| 6. | Nippon India ETF Long Term Guilt | RS. 2,77,915.13 |
| 7. | ICICI PRUDENTIAL NV20 ETF | RS. 78,127.92 |
| 8. | India Earning Wisdom Tree Fund (EPI) | RS. 2,77,915.13 |
| 9. | Motilal Oswal NASDAQ 100 ETF | RS. 31,048.98 |
| 10. | SBI ETF 10 Year Guilt | RS. 6,43,285.27 |
Source: www.mutualfundindia.com
You can choose any ETF from the list and invest in them.
How You Can Invest
Investing in ETFs is easy. You need to open demat account through any online discount broker. Then you can buy any ETF. You can buy the stocks, bonds or securities under the ETF. Trade in ETF is similar to stocks. You can buy and sell it during the trading hours. You can buy at a certain price and sell it when the price increase. That’s how you will earn from ETFs and make money from ETFs.
Conclusion
I have described How do you make money running an ETF fund. Hope this will help to understand this topic. I can advise that ETFs are the best options for the small traders and for those who want to invest in a safe manner. They can consider investing in ETFs. But before investing analyze properly about the ETFs and in which sector you will invest.
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Wishing you safe and profitable investment.
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FAQs
ETF vs Mutual Funds which is best?
If compared with mutual funds then ETF is best. In ETFs there is no minimum capital required, you can trade with the minimum value of a stock price. But in mutual funds you can not invest in your choice. ETFs have transparency and more liquidity. Also it is tax efficient.
How you should hold an ETF?
If you invest in ETFs and want a good return then go with a long term investment. Because of how much time you will spend in the market your profit potential will automatically increase. But at one point you have to exit. How to know? You can target one level where you will exit or if your stocks are performed well and moved in one sided direction and you have earned 20% – 30% of profit then can exit the entire position.