Beta- Analyzing mutual funds

Guru Prasad -
 The risk of any investment made always depends on the volatility in the following investment. If we can have a factor that could tell us about the volatility of a investment and help us judge our risk and corelate it with our capability to take risk, how would that be? Well Beta factor is one such factor that could help us know the sensitivity of our stock or portfolio fund that we have chosen to invest. Beta ratio:- Understanding Beta:-  Beta is a metric used in fundamental analysis to determine the volatility of a stock with comparison to the overall market that has a fixed beta ratio of 1 always. Stocks or funds that are ranked with a beta ratio above 1 generally tend to fluctuate more and hence give access to more risk but yielding higher returns too at the same time if gone in favour. While the risk is slightly less in the funds with beta ratio below 1 they give less but yet stable return on investments generally. Hence, the beta factor can be said as a risk- reward factor, helpi
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What are ETFs? How is it different from mutual funds?

Guru Prasad -

 What are ETFs:-

An exchange traded fund (ETF) is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies. ETFs generally offer low expense ratios and fewer broker commissions than buying the stocks individually. An ETF is called an exchange traded fund since it's listed and traded on an exchange just like stocks. The price of an ETF’s shares will change throughout the trading day as the shares are bought and sold on the market.

There could be various types of ETFs such as Bond ETFs, Industry ETFs, Commodity ETFs, Currency ETFs, Inverse ETFs. 

How is it different from a mutual fund or index funds:-

  • ETF prices keep fluctuating throughout the trading hours just like any other stock in the stock market while the mutual funds or index funds set their prices only once for the whole day and trade only once day after the market closes. 
  • Mutual funds are comparatively easy to buy and sell at any time but in ETF you always require a proper buyer and a seller to trade, hence it makes it difficult to sometimes sell as there might not be availability of a buyer always.
  • But, the additional advantage that they provide over mutual funds or index funds is that they that ETFs tend to be more cost effective and liquid compared to mutual funds.
  • ETFs could contain commodities, bonds or other holdings as well while Mutual funds only deal with stocks.
Best known ETFs in India:-

Some of the well known ETFs in India could be stated as Motilal MOSt Oswal Midcap 100 ETF which is said have given the highest return in the last 1 financial year ranging about 85.12%. But if you look at comparative study of three year Kotak NV 20 ETF is said to have given a return of almost 16.7% and ICICI Prudential NV20 ETF is said to have given a return of almost 16.64% proving to be one of the best trading ETFs in India.

Should you invest?
Investing in ETFs could be a good way to diversify your portfolio but since sometimes buying and selling of ETFs could prove to be a problem and both mutual funds and ETFs have their own advantages and disadvantages it is upto you and your opinion. But, remember that what also matters is how much are you investing.





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