1. An ETF is a pooled fund traded on an exchange
Like a mutual fund, it holds a portfolio. Unlike a normal open-ended fund transaction, ETF units trade during market hours through the exchange.
Tip: ETF combines fund exposure with exchange trading.
2. Market price and NAV are related but not identical
ETF units trade at market prices that can move slightly above or below underlying NAV because of demand, liquidity and market-making.
Tip: Do not assume last traded price always equals NAV exactly.
3. Brokerage, spread and liquidity matter
Low expense ratio does not capture every transaction cost. Bid-ask spread and brokerage can matter, especially in thinly traded ETFs.
Tip: Compare total ownership cost, not only expense ratio.
4. ETF vs index fund is often an operational choice
A traditional index mutual fund can suit automated SIP-style investing; an ETF can suit investors comfortable with demat, exchange orders and intraday pricing.
Tip: Same underlying idea can have different buying mechanics.
5. Quick check
Which is unique to ETF buying compared with normal mutual-fund purchase?
Answer: A - ETFs trade on exchanges, so market price and spread matter.