Question

Exchange-traded funds (ETFs) are a fairly recent financial innovation having only emerged on the scene in 1993. The first ETF was Standard and Poor’s Depository Receipts (SPDRs) which was designed to track the S&P 500. Since 1993 ETFs have exploded in popularity and are now a fixture in today’s investment landscape. According to the 2011 Investment Company Fact Book the total amount of cash invested in ETFs exceeded $992 billion by the end of 2010 and there are now more than 1,000 ETFs. ETFs are now second only to mutual funds in terms of choice of investment vehicle.

Research two specific ETFs and answer the following questions about each one.

1. What type of market index or asset class are these ETFs attempting to track?

2. How have these two ETFs performed over the past two years?

3. Would you invest in these two ETFs?

Answer 1

1. Two specific exchange traded fund would be as follows-

I. Nifty Bees- it is an exchange traded fund of Nippon Asset Management which is representing the Nifty 50. It is going to track all the equity shares listed in nifty.

II. Gold Bees- this is an exchange traded fund of gold.it is also managed by Nippon Asset Management and it is representing units of gold.

2. Nifty Bees had almost provided no rate of return in past 2 years because there has been a wild correction due to coronavirus concern.

Gold Bees-it has almost provided 40% return in past 2 years due to increase in the prices of gold.

3. I will be investing in gold bees but I will be avoiding niftybees because this is a time of high uncertainty and I would like to have exposure in gold as a safer investor.

Nifty Bees are highly exposed to uncertainty and they are prone to correction so I will be investing in gold bees.