Exchange Traded Funds (ETFs) are mutual fund units which investors buy/sell from the stock exchange, as against a normal mutual fund unit, where the investor buys /sells through a distributor or directly from the AMC. Practically any asset class can be used to create ETFs. Globally there are ETFs on Silver, Gold, Indices. Gold ETFs are a special type of ETF which invests in Gold and Gold related securities. Investors can buy G-ETF units from secondary markets either from the quantity being sold by the APs or by other retail investors.
Retail investors can also sell their units in the market. Exchange Traded Funds (ETFs) are open ended mutual funds that are passively managed and most of them seek to mirror the return of an index, a commodity or a basket of assets. ETFs are listed and traded on stock exchanges like stocks. They enable investors to gain broad exposure to indices or defined underlying asset (commodity) with relative case, on a real-time basis, and at a lower cost than many other forms of investing. Gold backed Exchange Traded Funds (ETFs) are securities designed accurately to track the gold price. ETF liquidity is supported by large professional market makers and dealers, in the normal way of providing liquidity on the relevant stock exchange. Additionally there is the facility to create and redeem new units – on demand.
Index Funds (IFs) focuses on the performance of specific stock indices, as opposed to other types of ETFs that are based on oil or other commodities. Index Funds are appealing to certain kinds of investors because they are inherently more stable than investing in specific stocks. Index Funds spread the risk factor over the entire index, as such; large institutional investors like pension funds as well as older individual investors who are looking to reduce the risk in their portfolios, often find Index Funds a preferable alternative to buying stock of individual companies.