General

What should I check before investing in ETFs?

Before investing in ETFs, you should check some of the parameters like:

1. Expense Ratio: This is the fee charged by the AMC for managing the ETF. The more the expense ratio the lower your returns

2. Tracking Error: Measures how closely the ETF tracks the underlying index. Lower tracking error means the ETF also has replicated the gains of the underlying.

3. AUM: ETFs with Higher AUM generally have higher liquidity. Higher liquidity reduces your impact cost.

4. Price vs NAV difference: Unlike mutual funds, ETFs trade like stocks, meaning their Market Price can be different from their actual Net Asset Value (NAV). If the market price is higher than the NAV, you are paying a premium; if lower, you are buying at a discount.