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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Collective Investment Vehicles

An Exchange Traded Fund (ETF) tracking an index differs from a conventional open-ended index fund mainly because the ETF:

An ETF is listed and traded on a stock exchange throughout the trading day at market prices, so investors need a demat and trading account. It is passively managed and can show tracking error, so index returns are not guaranteed.

  1. AHas a manager who actively selects stocks outside the index
  2. BIs traded on a stock exchange at market prices during trading hours, and a demat account is needed to hold itCorrect
  3. CCannot be bought by retail investors
  4. DAlways guarantees returns equal to the index

Explanation

ETF units are listed and traded on exchanges during market hours at market prices, so a demat and trading account is required. An index ETF is passively managed. Tracking error means returns may not exactly equal the index, so no guarantee exists.

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