Full transcript of “ETF vs Mutual Funds Which is Better in 2025 | Exchange Traded Funds vs Mutual Funds | ETF's ?”. Click a timestamp to open the video at that moment. Need another video? Use the YouTube transcript generator.
0:01 Hello Asset Wave Tribe, today on our channel we are going to cover a video that you have been asking for for a long time. We often hear about ETFs, or exchange-traded funds, in the market . So in today's video, let's learn in detail what ETFs actually are, how they work, are ETFs better or mutual funds better, and also how to invest in ETFs and how to select a good ETF. So like the video now and subscribe to the channel . Many people are watching the videos but not subscribing to the channel . If you subscribe, it will give us a boost by bringing you more good videos like this on our channel. So do n't forget to subscribe and let's log in without getting locked out. Exchange Traded Funds are called ETFs for short . ETFs also work like open-ended funds, i.e. mutual funds. But the difference is that ETFs are traded directly on exchanges.
0:47 Just like we purchase stocks from the NCR BSE, we can also purchase ETFs. And this ETF also has an underlying asset class. It could be stocks, it could be currencies, it could be bonds, or even commodities like gold and silver . Just as mutual funds are based on different asset classes, so too are ETFs. But mutual funds are not traded directly on exchanges like the SEC and BSE . We have to buy them from the ATM . But when it comes to ETFs, they are traded directly on exchanges, so like stocks, we can do delivery or intraday trades in ETFs as well . So, if you observe correctly, you will see the features of stocks and yes, mutual funds in ETFs . And just as a mutual fund has a portfolio, an ETF also has a portfolio or underlying asset class.
1:33 If this sounds a little confusing, don't be confused. If you take an example, you will understand clearly. For example, let's take the Nifty 50 index, which is popular in the market. Again, just for example, but do not consider it as any kind of investment advice . So what is the Nifty 50 Index? It is an index that measures all of the top 50 companies in India . Now, there are Nifty 50 Index Funds based on the Nifty 50 Index, as well as Nifty 50 ETFs . Both of these perform almost exactly like the Nifty 50 . For example, if the Nifty 50 reacted positively today, ETFs will also react positively. Index funds will also react positively. Although these two work in the same way, the major difference is that ETFs move live. This means that just
2:19 as the Nifty 50 sees market volatility rise and fall live, the Nifty 50 ETF also moves in the market . But that's not the case when it comes to mutual funds. Mutual funds always move based only on the closing price of the day . So we can buy the ETF at the price shown live on the market task . But that's not the case with mutual funds. When we invest in mutual funds, units are allocated based on the closing price of that day . So, just as index mutual funds have funds based on large caps, mid caps, small caps, and sectors, there are also ETFs. And there are not only gold-related ETFs based on indices, there are also silver-related ETFs. There are also ETFs related to currencies and other bonds . So, we have seen an example related to Nifty 50,
3:06 now let's also see an example related to a gold ETF and gold fund . So for comparison, let's look at the Nippon India Gold Fund and also the Gold ETF . You might notice that these two perform almost the same . But if you look at the last one year, you will see a slight difference in returns. Here we can learn the difference between mutual funds and ETFs. So whatever ETFs are, whatever their underlying asset class is, it could be an index, it could be gold, it could be silver, it could be something else. Whatever that asset class is, it will track it directly in live and perform accordingly . But when it comes to mutual funds, we can see a slight delay in this execution . And in addition, mutual funds have a slightly higher expense ratio when compared to ETFs. So the slight difference in returns between ETFs and index funds is
3:53 due to this tracking error. In the case of mutual funds, there will be an expense ratio, and in the case of ETFs, there will be ST, JST and other charges. In addition, since we can access ETFs only in a demat account, we will also have to pay annual maintenance charges related to that demat account . So overall, charges and expenses are slightly higher for mutual funds compared to ETFs . That's why index ETFs sometimes show slightly better returns than index mutual funds. So, looking at this far, it seems that ETFs are better than index funds, but don't jump to conclusions right away. This is where we need to compare ETFs and mutual funds in some detail and learn the differences between them. Because when comparing index ETFs and index funds, ETFs obviously have a better edge. But active funds, which are funds that are
4:38 actively managed by a fund manager rather than an index, try to beat the benchmark in almost the majority of cases. So we should only compare an index ETF with an index fund. Also, it should not be compared with active funds. So let's look at the key differences and comparisons between an index fund and an index ETF. ETFs generally have an expense ratio . And even when comparing all of these, the expenses are slightly lower than those of an index fund . So in case you are concerned about cost sensitivity, ETFs may be a better option for you than index funds . And then the minimum investments Investments in index funds start with a minimum of ₹500 . But that's not the case with ETFs. We have to purchase whatever the price of a stock is. Likewise, the ETF price can be above
5:24 or below 500. You have to purchase it with whatever amount you have . So if you want to start with a very small amount, ETFs are also a better option. And then there is trading flexibility, so since ETFs are traded during market hours, we also have trading flexibility in this. It also has the option to take intraday, momentum, or swing trades . But when it comes to mutual funds, this trading becomes a little more difficult. If we look at the due to expense ratios and exit loads and then the taxation part, the same taxation is applicable to both of these . Short-term capital gains, i.e. if we book profits within one year, are 20% and long-term, if we book profits after one year, are 12.5%. Considering the investment horizon, ETFs are suitable for both short-term investments and long-term investments.
6:10 But mutual funds are more suitable for those who invest with a long-term view . And then there are the price stability ETFs that fluctuate during market hours, so if you are a new investor and you think you cannot withstand this price fluctuation, it is always good to invest in mutual funds because the fluctuation there is only reflected at the end of the day . So, even though ETFs have a better edge in this comparison, mutual funds are still a better fit for those who want to invest in RSIPs from a long-term point of view. Because there is no SIP option in ETF. Every month we have to manually check the price and invest. But mutual funds have an autopay option . And besides, to invest in ETFs, you must have a demat account. But a demat account is not mandatory for mutual funds. I
6:59 hope you have a clear understanding of what an ETF is and the difference between ETFs and mutual funds. Now let's see what the risks are in ETFs and how we should select an ETF. So if we look at the risk part related to ETF, then since ETF is also a market linked product, it comes with market risk . Before investing, try to do your full- fledged research or consult your financial advisor before investing. So this is another risk that we need to check when selecting liquidity. Some ETFs have very low liquidity. So, if you are considering investing in an ETF, try checking its AUA and volumes. Because of the volume, buy and sell transactions take some time . That's why it's better to check for funds with high liquidity . And purchasing an ETF is just like purchasing stocks: opening a demat account, loading money into a wallet,
7:45 and purchasing stocks . So this is completely ETF-related information . We put a lot of effort into presenting such a complicated topic to you in a simple way . In case you liked this video, don't forget to like it and subscribe to the channel now. And tell us in the comments section below which topic you would like to cover next, and we will definitely try to make a video on it . See you with another video, Till Then Boy Boy . [Music]
