Investing in ETFs amid volatility may prove costly: Here's why
Low costs have drawn investors to these ETFs. These are getting preference over index funds that are not as cheap.
Synopsis
On February 24, 2022, the stock market index, Nifty, fell by almost 5% whereas the largest ETF fell by 3% only. It is quite different from the often known concept that ETF prices rise or fell more sharply than the index. Read on to know why this happened and what investors can do in such a scenario.
During sharp market movements in recent weeks, exchange-traded funds (ETF) saw highly erratic pricing. Many equity ETFs struggled to stay in step with the market. Even as AMCs continue their ETF launching spree, are investors being exposed to elevated risks? As passive vehicles, ETFs only mimic the underlying index. The aim is to ensure returns in line with the market. These buy the same stocks as those in the index and in the same proportion.
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