Are ETFs worth investing in? Your guide to finding the best ETFs for growth
Exchange Traded Funds (ETFs) track a group of underlying assets like a basket of securities. They can also replicate the performance of the entire index, which makes them a good investment option. ETFs are listed and traded on exchanges just like ordinary shares, offering diversification and flexibility to investors.
Pros and cons of ETFs
Some pros of ETFs are:
- ETFs track broader assets, which allows you as an investor to mitigate risk arising due to market volatility. A fund’s price does not fluctuate as much as an individual security’s because its holdings are aggregated
- ETFs can help you safely diversify your portfolio because investing in it means you are buying shares or part of shares in multiple companies, rather than investing in the shares of a single company
- They have a lower expense ratio than ordinary mutual funds
Some cons of ETFs are:
- They are subject to market risks
- The yields may be lower than those of some stocks with high returns
- If the index is not diverse, the ETF won’t be either
- You have to pay capital gains tax
Which are the best ETFs for growth?
To choose the best ETFs for growth in 2021, here are some factors you must consider:
- Top growth ETFs have low tracking errors
- There is low risk with regards to expense ratio
- Check whether the ETF is sufficiently liquid
Here are a few best ETFs for growth and income for you to invest in:
- NIFTY 50
Many financial houses offer ETFs tracking the NIFTY 50 index; some examples include Mirae Asset and ICICI Prudential. The index has shown a consistent rise over the years. You should check the NAV when choosing one since they do vary a lot between mutual fund houses.
- Motilal Oswal NASDAQ 100
As the name suggests, this ETF gives Indian investors a chance to earn high returns from American stock investments by tracking NASDAQ. It has shown growing returns and a low expense ratio over the years.
- Gold ETF
Those looking to trade in gold without owning it in physical form could consider gold ETFs. Popular ones include SBI Gold ETF, Nippon Gold ETF and Axis Gold ETF that have shown returns of over 10% in 3 years. The market caps are also high.
- SENSEX ETFs
Among ETFs that track the BSE SENSEX, many like Gold BeES and HDFC or SBI SENSEX ETF have decent returns. They follow the index and therefore, track market returns quite closely. When the SENSEX rises sharply, one can get high returns. These funds are less volatile than many mutual funds.
Invest in ETFs to meet financial goals
ETFs could be a good vehicle for investors who are preoccupied or are new to investing. However, before investing, it is always prudent to consult a financial expert so that you can make smart investment decisions that are in line with your financial goals, investment horizon and risk appetite.