Want to invest in ETFs? Know benefits of Exchange Traded Funds here

ETFs Benefits: Those who are planning to invest must note that Exchange Traded Funds (ETFs) are an excellent investment product for all types of investors. The National Stock Exchange (NSE) has recently highlighted certain benefits of the ETFs.

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The NSE tweeted from its official Twitter handle about the facts regarding ETFs which may be beneficial for the investors. The tweet said, "ETFs are an excellent investment product for all types of Investors. Enlisted below are some ways where investment in ETFs benefit investors."

ETFs are an excellent investment product for all types of Investors. Enlisted below are some ways where investment in ETFs benefit investors. #ETF#NSE pic.twitter.com/UnIPeSv7Rm

— NSEIndia (@NSEIndia) November 11, 2021

Now, in the first place one must be aware of what ETFs are. As per the NSE website, in recent times, ETFs have gained a wider acceptance as financial instruments whose unique advantages over mutual funds have caught the eye of many an investor. These instruments are beneficial for Investors that find it difficult to master the tricks of the trade of analyzing and picking stocks for their portfolio. Various mutual funds provide ETF products that attempt to replicate the indices on NSE, so as to provide returns that closely correspond to the total returns of the securities represented in the index. ETF's available on NSE are diverse lot. Equity, Debt, Gold and International Indices ETF's are available.

The ways in which the application of ETFs can be beneficial for the investors are as follows:

1) Efficient trading - It must be noted that the ETFs provide the investors a convenient way to gain market exposure like an index that trades like a stock.

2) Equitising cash - The investors with idle cash in their portfolios may want to invest in a product tied to a market benchmark like an index as a temporary investment before deciding which stocks to buy or waiting for the right price.

3) Managing cash flows - Investment managers who see regular inflows and outflows may use ETFs because of their liquidity and their ability to represent the market

4) Diversifying exposure - Investing in shares tied to an index or basket of stocks provide diversified exposure and reduces stock specific risk

5) Filing gaps - ETFs tied to  a sector or industry may be used to gain exposure to new and important sectors. Such strategies may also be used to reduce an overweight or increase in underweight sector.

6) Shorting or hedging - ETFs may be sold short against long stock holdings as a hedge against a decline in the market or specific sector