Want to buy an ETF? Check out these most liquid Equity ETFs
Although exchange-traded funds are superior to index funds in structure and tracking error, they lag behind on liquidity. Not all ETFs are liquid. Liquidity or the trading volume plays an important part in ETF selection. Choose ETFs with high liquidity, lower tracking error, expense ratio, and impact cost
The big benefit of an ETF over an index fund is its superior structure. An ETF can much closely mimic its benchmark index than an index fund because of the way an ETF is ‘created’. As passive investing gains traction among retail investors, an index funds’ underperformance - in the past - has put the spotlight on an ETF’s superior structure. But lack of liquidity can dampen an ETF, which might result in the rise of its impact cost.
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One of the main parameters that one should look at while choosing ETFs is liquidity. Liquidity, or the trading volume plays an important part in your ETF selection. Since you can buy and sell units only on the stock exchange, it is imperative that there should be ample sellers and buyers available when you want to buy and offload your units and you are able to get a good price. It is better to choose ETFs that are traded every day with decent volumes. You should strictly avoid the ETFs that are thinly traded. Here are the top actively traded equity ETFs on NSE. Source: NSEIndia and ACEMF. Returns are as of February 23, 2024. Portfolio data as of January 2024.
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Nippon India ETF Nifty 50 BeES 5 year return (CAGR): 16.8% Corpus: Rs 20,317 crore
