Cont.
In Previous Episode we have discussed about Different Kinds of Investment in Indian Stock Market. Remaining will be discussed in this episode.
4. Indices
A market index uses the prices of a small sample of shares chosen to be representative of the market to track market change. The majority of top indexes are weighted by market capitalization to account for the fact that as more shares are issued, there will be more trading opportunities. portfolios that they could be held in. Since the stocks that make up an index are also quite liquid, investors can easily and affordably replicate the index. The most frequently traded equities shares on that exchange make up narrow indexes in most cases. There are numerous other indices used to track other market cap groups or sectors.
The major uses of indices are:
- The index can be used to compare investment results on stock markets vs other asset types like gold or debt.
- An equity fund performance comparison using a stock market index as the benchmark is possible.
- The index represents the performance of the economy or any particular sector of the economy.
- Indices reveal the state of the market in real time.
- Index Funds, Index Futures, and Index Options all use indices as their underlying.
Most Commonly Known index:
- Nifty 50
- Nifty 100
- Nifty 200
- Nifty 500
- Nifty Mid 50
- Bank Nifty
There are also sector indices for information technology, pharma, fast-moving
consumer goods and such other sectors, created by the exchanges to enable tracking specific
sectors.
5. Mutual Fund Units
Mutual Funds (MFs) are investment entities that pool together investor contributions and then invest the money in a portfolio of assets that correspond to the investors' shared investment goals. The units that the fund has issued serve as a representation of each investor's portion. The value of the units, or Net Asset Value (NAV), fluctuates over time to reflect changes in the portfolio that the fund owns.
Both open-ended and close-ended MF schemes exist. An open-ended scheme gives investors the flexibility to purchase units from the fund whenever they want and to sell those units back to the fund whenever they want. There is no set maturity period for these systems. At the NAV-linked prices, the units may be purchased and sold whenever desired.
A closed-end fund has a fixed share capital and sells a fixed number of shares. unit of closed-end funds can be traded on any stock exchange where they are compulsorily listed.
It is Issued by Mutual Funds. The Main Investors here is Institutional and Individual It is issued through Direct issuance by mutual funds and Stock Exchange. It is regulated by SEBI, RBI.
6. Exchange Traded Funds (ETFs)
An Exchange Traded Fund (ETF) is an investment vehicle in which investors invest pooled funds Track a basket of indices, commodities, or assets. In that sense, it is similar to an index fund. Its portfolio reflects the index it tracks. However, unlike index funds, ETF shares are listed on stock exchanges. Traded on an exchange, continuously reflecting price changes in index or commodity prices.
ETFs offer the diversification benefits of index funds, plus the ability to buy or sell. Real-time prices, even in units of funds. Since ETFs are passively managed portfolios, Expense ratios are typically lower than mutual funds.
It is Issued by Mutual Funds. The Main Investors here is Institutional and Individual It is issued through Direct issuance by mutual funds and Stock Exchange. It is regulated by SEBI, RBI.
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