Till now, there were five passively managed funds in Mint50, with a mix of index funds and exchange traded funds (ETFs). Typically, we prefer ETFs because of their superior structure, low tracking error and therefore lower costs compared to index funds at large. But ETFs also have disadvantages, one of which is lack of liquidity. On many days, not enough ETF units are available for sale, and not always at the price you may want them for. Also, their price rises as the amount bought goes up.
For example: on 30 May, about 101,000 units of SBI ETF Nifty 50, largest passively managed fund in India, were available around noon on the National Stock Exchange. You could buy up to 7,000 units for Rs96.78 each. If you wanted more, the next 30,000 could be had for Rs96.89, the next 25 units for Rs96.90 and so on. The price goes up as quantity bought goes up. This is called impact cost, which can impact how much you finally save from buying ETFs, compared to say an index fund. Index funds typically have higher expense ratios than ETFs.
