Forum Views - May 2024
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FORUM VIEWS - MAY 2024
can buy and sell liquid ETFs both from the market as well as
the issuing Mutual Fund.
• Saves effort: Investors no longer need to make
unnecessary transactions or move money between the
trading account and the bank account. Liquid ETFs also
help avoid the need to go through the trouble of waiting for
cheques to clear, or making electronic transfers to a trading
account.
4. Can Liquid ETF be used for the stock margin
requirements? What percentage of Liquid ETF can be used
as margin money?
5. What are the things one should be careful about when
investing in Liquid ETF for any Investor?
6. How many Liquid ETFs are there presently and what is
the total size of the Industry?
Yes, Liquid ETF can be used for stock margin, this instrument is
approved by stock excahnges to be used as stock margin.
Approximately 90% of the amount can be used as margin
money.
Ans-Investors needs to be careful about, these things when
buying Liquid ETFs.
• Brokerage charges: Investors may have to pay brokerage
while purchasing liquid ETF units, and brokerage charges
vary from broker to broker. Most brokers may not charge
any brokerage on the purchase of these products thereby
increasing their appeal for investors. It is advisable for
investors to confirm the brokerage amounts that they will
be charged on trades in liquid ETF before making a
purchase. Besides, not only are liquid ETFs convenient to
purchase and hold, it is much quicker than moving money
between your bank and the broker.
• Fractional units: Liquid ETFs give returns in terms of
increase in units, which can add small fractions to existing
holdings; fractional units cannot be sold on the Exchanges.
However, the issuing mutual fund (MF) house purchases
back the fractional units
• As Liquid ETF fall under the category of Specified Mutual
Funds (Whose exposure to domestic equity shares is less
than 35%), any investment made after April 01,2023 will be
deemed as short term asset and will be taxable as per
income slabs applicable to investor.
The Liquid ETF is in the early stage as a product. Presently there
are around 10 liquid ETFs. The total size is approximately
18000cr. But with strong increase in the demat accounts as
being seen and more investors adding up to equity investing,
the product has a very strong future prospect.
• Can be used for margin: While buying or selling stocks, it
takes 3 days to complete a trade. To avoid the
inconvenience of issuing cheques or making electronic
transactions each time, some traders keep some margin
with their brokers. However, this margin (money) does not
earn any returns. You could purchase liquid ETF units worth
the margin you want to maintain and earn returns till the
time it is used to purchase stocks.
• Flexibility: Investors can use liquid ETFs for various
purposes, including as a parking place for idle cash, an
alternative to savings accounts, or as a short-term
investment option.
Liquid ETFs are suitable for both retail traders and investors. It
is being used by Portfolio Management Services (PMS)
providers, Futures & Options (F&O) brokers and institutions
which invest directly in equities. These funds are also suited to
the needs of High Net Worth Individuals (HNIs) as many times,
these investors may have funds lying idle either in a trading
account or they may be maintaining margin money with their
brokers on which no returns are earned. By parking funds in
liquid ETFs, investors can earn returns on idle funds while also
remaining liquid to benefit from attractive investment
opportunities. Liquid ETFs can help make trading more
profitable if used in the right manner. And that too, in a much
easier and convenient way!
3. Who should be using these Investment instrument? Is it
focussed for any specific investor segment(stock traders)
and why?
The Liquid ETF is in the early stage as a
product. Presently there are around 10
liquid ETFs. The total size is
approximately 18000cr. But with strong
increase in the demat accounts as being
seen and more investors adding up to
equity investing, the product has a very
strong future prospect.
With over 25 years of exemplary experience in the Mutual Funds industry, Saket
is a seasoned professional with a proven track record of building successful
organizations from the ground up. As a visionary Co-Founder of ETF Junction
since January 2022, he has led the establishment of a thriving platform,
revolutionizing the investment landscape for ETFs.
His journey began in 1997 at Kothari AMC, India’s first private sector mutual
fund, where he played a pivotal role in establishing the Mutual Fund business in
the Eastern part of India. Subsequently, as Zonal Manager for Franklin Templeton
and Zonal Head for Bharati Axa Investment Managers, he showcased
exceptional leadership in driving growth and fostering client-centricity.
In 2013, he founded Rastey Commuting Services, transforming it into a
prominent player in transportation across India over nine successful years. The
company was awarded at the BID convention awards in Paris in 2019,
recognized as the best in quality service among car rental services in India.
Saket completed his management education at IIM Kolkata in 2000. His
extensive expertise lies in navigating the complexities of the Mutual Funds
domain and orchestrating organizational expansion. With an unwavering focus
on innovation and excellence, he is committed to making a significant impact on
the Mutual Funds industry.
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