Learn everything about ETFs, types, benefits and features of ETF and how does ETF compare with an Index Fund? www.Quantumamc.com

1. ETFs vs Index Funds
Ghazal Jain – Associate Fund Manager, Alternative Investments
24th Sept 2021

2. Active Investing & Passive Investing
Active Investing
• Aim to beat the market’s returns
• Active selection of securities, thus higher
expense ratio
• Involves buying and selling of individual
securities or actively managed mutual funds
Passive Investing
• Aim to track the market’s performance
• No active decision in choosing securities ,
thus lower expense ratio
• Involves buying and holding Index funds
and/or ETFs

3. 3
What are ETFs?
• ETFs = Exchange Traded Funds
• ETFs are passive instruments that closely track an index
Graph is for indicative purpose only

4. 4
How do ETFs work?
• An ETF is a basket of securities (stocks/bonds/gold) , units of which are sold on an exchange
• Investors can buy units of that basket, just like buying shares of a company
• Like mutual funds, ETF units represent partial ownership of underlying basket of securities
• Your investment in the ETF could increase or decrease in value as the price of the underlying
stocks/bonds/gold changes
• Like individual stocks, buyers and sellers trade the ETF units throughout the day at prices that
change based on supply and demand

5. The most common types of ETFs in India are:
Equity ETFs track a particular index of stocks. The index may be based on the companies’ size,
region, industry
Bond or Fixed Income ETFs track a portfolio of corporate and/or government bonds
Gold ETFs track the price of gold

6. Equity ETFs
• Equity ETFs track a particular index of
stocks.
• They aim to track the price of the index and mimic
its returns
NIFTY ETF
CASH
ETF
UNITS
50 stocks
of Nifty
Index
Stock
B
Stock
A
Stock
C
Graph is for indicative purpose only

7. Benefits of Equity ETFs
Better Diversification
Lower costs than Actively managed Mutual Funds*
Tax efficiency
Flexible trading
*Being passive products, they tend to have lower expense ratios than actively managed mutual funds

8. Gold ETFs
• Gold ETFs are Investment vehicles that
invest in physical gold
• They aim to track the price of gold and generate
returns in line with the returns of physical gold
GOLD ETF
CASH
ETF
UNITS
Graph is for indicative purpose only

9. Features of Gold ETFs
• Gold ETFs, even though a financial form, are very real as each and every ETF unit is backed by 24 carat
physical gold
• Buying Gold ETFs means you are purchasing gold in an electronic form. When you actually redeem Gold
ETF, you don’t get physical gold, but receive the cash equivalent
• Just as shares represent the extent of equity ownership in a company, units represent your extent of
ownership in the ETF’s underlying asset i.e. gold
• Gold ETF units are listed and traded on NSE and BSE. You can buy and sell gold ETFs using a DEMAT
account just as you would trade in stocks
• Gold ETFs combine the flexibility of stock investment and the simplicity of gold investments

10. Benefits of Gold ETFs
• Each and every ETF unit is backed by 24 carat physical gold
• Stored in accredited professional vaults: Investors do not have to worry about purity, storage, and
insurance of gold
Purity
• No making charges or high premiums
• Gold ETFs transfer benefit of wholesale purchase prices to investors
• Benefit of GST credit at Scheme level time of selling gold
• Traded close to the market price of physical gold, with thin difference between buying & selling price
Price efficiency
• ETF units can be continuously bought and sold on the NSE and BSE
Liquidity
• They offer investors a means of participating in the gold market at low
denominations of 1/2 gm
Accessibility
• You can purchase and sell online with a DEMAT account from the comfort
of your home
Convenience
• Gold ETFs are regulated by SEBI
Regulation

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Costs of an ETF
Explicit Costs
• Expense ratio
• Brokerage commissions
Implicit Costs
• Tracking error
• Bid-ask spreads

12. 12
What are Index Funds?
Passive mutual funds that copy performance of an index like Sensex or Nifty
Hold same securities as index in same proportions
Buys or sells securities only when composition of Index changes

13. Benefits of Index funds
Better Diversification
Lower costs
Tax efficiency

14. 14
ETFs vs Index Funds
ETFs Index Funds
Investment Offers exposure to assets of a
benchmark index
Offers exposure to assets of a
benchmark index
Management Passively managed Passively managed
Buy/Sell Can be bought or sold at real
time NAV
Can be bought or sold only at
the end of the day at NAV
Liquidity Buy and sell on exchange Buy and sell with AMC only
Performance Similar to or lower than the
benchmark index
Similar to or lower than the
benchmark index
Costs Expense ratio (0.1-0.5%) +
Brokerage commissions
Expense ratio (0.5-1.5%)
DEMAT account Required Not required
SIP facility No Yes

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Limitations of ETFs and Index funds
1) They don’t offer flexibility to the fund manager in managing market downsides
2) They simply mimic an underlying benchmark and hence cannot generate alpha
3) Index funds lag their benchmark returns due to the presence of tracking error

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Which passive investment should you opt for?
• While choosing between an ETF and index fund, investors need to weigh the pros and
cons of both the passive avenues
• Broadly, if you are seeking convenience, index funds are likely to be the right choice
• But if you want cost advantage and want to time your entry and exit based on your
analysis of the markets, ETFs are likely to be the better alternative
• For both ETFs and Index funds, you should pick a fund with minimum tracking error

17. The choice should not be Active or Passive, it should be Active
AND Passive
• Large cap space: efficient and widely covered = ETFs and Index Funds
• Mid /small caps, Value style, ESG investing = Scope for active
management

18. Disclaimer – Terms of Use
The data in this presentation are meant for general reading purpose only and are not meant to serve as a professional guide/investment
advice for the readers. This presentation has been prepared on the basis of publicly available information, internally developed data and
other sources believed to be reliable. Whilst no action has been suggested or offered based upon the information provided herein, due
care has been taken to endeavor that the facts are accurate and reasonable as on date. Quantum AMC shall make modifications and
alterations to the performance and related data from time to time as may be required as per SEBI Mutual Fund Regulations. Readers are
advised to seek independent professional advice and arrive at an informed investment decision before making any investment. None of
the Sponsors, the Investment Manager, the Trustee, their respective Directors, Employees, Affiliates or Representatives shall be liable
for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from
the data/information/opinions contained in this presentation. The Quantum AMC shall make modifications and alterations to the
performance and related data from time to time as may be required.
Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme are not being offered a guaranteed
or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme may go
up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment
risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the
sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme. Statutory Details: Quantum Mutual Fund (the
Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of
Sponsor limited to Rs. 1,00,000/-). Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset
Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act,
1956.
24th September 2021
Mutual fund investments are subject to market risks, read all scheme related documents carefully.

19. Thank You
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