Different aspects for picking ETFs! (Part I)

Investors should consider the following 6 aspects while buying ETFs from the secondary markets: Premiums and discounts of spot price to the indicative NAV: If the price of the ETF trades above its iNAV (indicative NAV), the ETF is said to be trading at a ‘premium’ and if the price is below its iNAV, it is said to be trading at a ‘discount.’ This leads to higher impact cost. An ETF with the market price having lower premiums and discounts to its iNAV is always preferable. Indices should align with one’s risk profile: Mutual fund companies offer a wide choice of ETFs based on the broader equity indices, sector, thematic, and smart beta ETFs. On the fixed-income side, liquid, corporate bond and gilt ETFs are also part of the offerings. One can pick the ETFs based on one’s risk profile and financial goals. Check liquidity: The trading volume or liquidity plays an important part in your ETF selection. Since you buy and sell on the stock exchange, the key requirement is that there should be ample sellers and buyers available when you want to buy and sell units and you are able to get a good price.