An index
like Nifty or Sensex already reflects the best performing companies at any
point of time. A worse performing company stock is thrown out and a good one is
replaced in stead. So stock picking is
done for you automatically and free of cost.
In most
cases, one unit of and Index ETF fund is exactly 1/10th of the main
market index. i.e, if the Nifty is at 6000 points today, one unit of your ETF
is worth 600 rupees. Tomorrow if the nifty falls to 5750, the unit
correspondingly falls 1/10th of the Nifty value i.e 575 rupees.
Now if you
think the sentiment is good, you can buy an Index ETF at 575 per unit. Or you
can wait for it to fall further to enter.
Similarly
when the market goes up, it’s time to sell.
How To Do it?
You will
need a 3-in-1 account i.e a savings a/c, a demat a/c and a trading a/c in order
to transact. Almost every leading bank offers this facility today.
All you need
to do thereafter is find out the closing price of the index before taking
action. The bank will also accept orders over the phone. Clearly tell them what
quantity you wish to buy and at what price. It will be done as soon as the
index achieves your target price. The same goes for selling too.
Fees
A fee of
0.50% is levied for each Index ETF transaction. This is far lower than the 2-4%
that mutual funds or insurance companies charge as their yearly fund management
fees.
No more
watching business news for hours together and getting confused by what
‘experts’ say about individual stocks.
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