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ETFs – Gaining Prominence

ICICIdirect Research 19 Dec 2025 DISCLAIMER

Academic studies globally have suggested that 70%-90% of the long-term portfolio return is determined by asset allocation rather than individual security selection or market timings. Therefore, investors are better-off focusing on passive investing rather than chasing best stock or the best portfolio.

ETFs are the best form of passive investing with no stock selection or fund manager risk.
Expense ratio is the lowest in ETFs. For instance, the expense ratio of Nifty 50 ETF is as low as 0.02%. Mutual funds expense ratio may vary from 1% to 2% in most cases.

ETF market has grown significantly, investors now have ETF choices across Largecap, Midcap, Smallcap and Sectoral ETFs. For instance, Nifty 50, Nifty Next 50, Nifty 500, Nifty Midcap 150 ETF, Nifty Smallcap 250 ETF, IT ETF etc.

The investment ticket size is lowest in ETFs as investors may invest as low as 1 single unit (just like 1 share) amounting to as low as Rs 100 (ICICI Pru Gold ETF price currently is around Rs 112). Therefore, even with a small amount, investors may diversify adequately.

Investors may invest intra-day and can utilize intra-day volatility to their advantage by putting say limit orders. In mutual funds, end of the day NAV is what investor gets.

ETFs are easier to utilize as margin for equity or commodity trading as they are treated as equity by most of the brokers.

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