- First, what is an ETF?
An ETF or exchange traded fund invests in a basket of securities that mostly tracks a certain index. ETFs are similar to mutual funds, but the big difference is that can be bought and sold only through the stock exchanges. Like you would buy stocks, you can buy ETFs through the trading hours from an exchange.
- What is a bond ETF?
A bond ETF invests in a basket of bonds in the underlying index. It can invest in the government, corporate, or public sector unit bonds.
- What is the cost?
A bond ETF is cheaper than an actively-managed debt fund. For instance, Bharat Bond ETF will charge 0.0005%. “It is the cheapest mutual fund product in India and one of the cheapest debt fund products in the world,” claims Edelweiss Mutual Fund. The fund house has the mandate to manage Bharat Bond ETF.
- What is the tenure?
Bond ETFs seek to track specific maturity bucket such as short term, medium term, and long term. Some bond ETFs can also have defined maturity. Like Bharat Bond ETF has two defined maturities: three and 10 years. Such bond ETFs are called target maturity bond ETFs. They are similar to fixed maturity plans with an added advantage of any time liquidity.
- Bond ETFs are tax efficient
Bond ETFs are taxed like any regular debt mutual funds. Capital gains on investments held over 36 months are taxed at 20% after providing for indexation benefit. Short term capital gains on investments held for less than 36 months will be taxed as per the tax slab applicable to you.
- How to invest in a bond ETF?
You need a demat account to invest in an ET, including a bond ETF. Mutual fund investors also has the option to invest via a fund of fund. Edelweiss AMC is launching a fund of fund for Bharat Bond ETF.
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3 Comments on this Story
Gopalakrishnan Krishnan446 days ago
Another trap to tap funds from the market without having any clue as to how to fix the economy which is in deep crisis.
Kochar Bipin447 days ago
To boost the bond ETF market and to protect long term savings of workers, Government should make it mandatory for all Provident Funds and Insurance Funds to invest at least 40% of their funds in form of bond ETFs and keep their investments in corporate debentures between 20 to 30% range only with upto a maximum of 30% should be invested in Nifty 500 or Nifty 50 funds.
Siddhartha Edukulla448 days ago
new type of screwing the people