The rise of ETFs has been a game-changer for investors

Tradeplus - the online brand of the Chennai-based Navia Markets Ltd, is serving customers across the globe for over 25 years with the mission of making investing and trading in stock markets simple and rewarding for every customer. They make this possible by bringing technology driven, simple yet intelligent solutions that enable our customers to invest or trade at almost zero cost. Speaking to Bizz Buzz exclusively, at a time when the world is in the process of celebrating 30 years since the launch of the first ETF, the SPDR S&P 500 Trust (NYSE: SPY), S K Hozefa, Chief Executive Officer (CEO), Tradeplus Online, narrates the journey of ETF over the years and explains how game changing this has been among the investor community

Before the rise of ETFs, investors had been overpaying for under-performing mutual funds. But with the launch of the first ETF, all of that changed. ETFs offered a low-cost option for investors to track indices and invest in various themes, which attracted a lot of investors who were looking for a better way to invest their money. Since its launch, ETFs have continued to grow in popularity, attracting investors who were tired of overpaying for under-performance in the mutual fund industry. In the past three decades, ETF assets have grown dramatically, and are projected to overtake mutual funds in the US by 2025

The Indian ETF market saw substantial inflows in 2022, with the total inflows exceeding Rs 80,000 crore (nearly $11 bn). This significant inflow of funds reflects the growing popularity of ETFs among Indian investors, who are increasingly seeking low-cost and convenient investment options. The growth of ETFs in India can be attributed to several factors, including the increasing awareness of ETFs among investors, favourable regulatory changes, and the growing popularity of passive investment strategies. In recent years, the government has launched several ETFs, including the Bharat Bond ETF, which invests in bonds issued by government-owned companies, and the CPSE ETF, which invests in Central Public Sector Enterprises

The world recently (Jan 24, 2023) celebrated 30 years since the launch of the first ETF. Does ETF still remain the largest and most actively traded in the world?

Yes, the first ETF- SPDR S&P 500 Trust (NYSE: SPY) was launched 30 years ago. The ETF still remains the largest and most actively traded in the world with over $374 billion in assets. It has actually revolutionized the investment industry by offering a low-cost option for investors to track indices and invest in various themes.

How much has the investment industry changed since then?

Before the rise of ETFs, investors had been overpaying for under-performing mutual funds. But with the launch of the first ETF, all of that changed. ETFs offered a low-cost option for investors to track indices and invest in various themes, which attracted a lot of investors who were looking for a better way to invest their money. Since its launch, ETFs have continued to grow in popularity, attracting investors who were tired of overpaying for under-performance in the mutual fund industry. In the past three decades, ETF assets have grown dramatically, and are projected to overtake mutual funds in the US by 2025.

Has it been a game changer?

Yes, you can say that the rise of ETFs has been a game-changer for investors. With low fees, increased transparency, and a wide range of options, investors are now able to make informed decisions about their investments without having to pay a premium for under-performing fund managers.

What about the Indian ETF market, in particular?

The Indian ETF market saw substantial inflows in 2022, with the total inflows exceeding Rs 80,000 crore (nearly $11 billion). This significant inflow of funds reflects the growing popularity of ETFs among Indian investors, who are increasingly seeking low-cost and convenient investment options.

The asset under management (AUM) for passive funds as a category also grew by more than 140 per cent in 2022, demonstrating the increasing adoption of passive investment strategies in India. The growth of ETFs in India can be attributed to several factors, including the increasing awareness of ETFs among investors, favorable regulatory changes, and the growing popularity of passive investment strategies. In recent years, the government has launched several ETFs, including the Bharat Bond ETF, which invests in bonds issued by government-owned companies, and the CPSE ETF, which invests in Central Public Sector Enterprises.

Can you mention some of the popular ETFs in India?

I would mention:

1. Nifty 50 ETF: This ETF tracks the performance of the Nifty 50 index, which is composed of 50 of the largest and most liquid stocks listed on the National Stock Exchange of India.

2. Sensex ETF: This ETF tracks the performance of Sensex, India's benchmark stock market index.

3. Nifty Next 50 ETF: This ETF tracks the performance of the Nifty Next 50 index, which is composed of the next 50 largest and most liquid stocks listed on the National Stock Exchange of India.

4. Bharat Bond ETF: This ETF invests in bonds issued by government-owned companies and provides investors with an opportunity to invest in government bonds while enjoying the benefits of an ETF.

5. Gold ETF: This ETF invests in physical gold and provides investors with an opportunity to gain exposure to the price movements of gold.

6. Nifty Bank ETF: This ETF tracks the performance of the Nifty Bank index, which is composed of the largest and most liquid banking stocks listed on the National Stock Exchange of India.

7. Nifty IT ETF: This ETF tracks the performance of the Nifty IT index, which is composed of the largest and most liquid information technology stocks listed on the National Stock Exchange of India. These are some of the top ETFs in India, and the list is not exhaustive.

What, according to you, are the positive impacts that the growth of ETF leave on Indian market?

The growth of ETFs in India is a positive sign for the investment industry and is expected to provide increased investment options and accessibility for Indian investors in the years to come.

The continued growth of the ETF market in India is also expected to drive further innovation in the passive investment space and provide a boost to the overall economy.

As the ETF industry continues to grow and evolve, it remains a testament to the power of innovation and the drive to create better investment opportunities for all. On this 30th anniversary of the ETF, Tradeplus celebrate its impact on the investment world and look forward to continued growth and success in the years to come.

What is Tradeplus doing in this field?

To make it easier for investors to invest in ETFs Tradeplus has a unique feature in its Rocket App called Baskets. We have pre-defined baskets starting from Rs 300 up to Rs 1500 using which people can invest into a variety of Indian & Global ETFs as One Time Investment or as a SIP to invest every month.