Capitalmind Podcast

Exchange Traded Funda: How ETFs Work

22 snips
Apr 10, 2025
Explore the booming world of ETFs and their contrasting popularity in the U.S. versus India. Discover why passive investing is thriving in one market but hasn't caught on in the other. The discussion dives into the mechanics of ETFs, pricing dynamics, and the pivotal role of market makers. Learn about the tax advantages, operational differences, and potential long-term benefits of ETFs over mutual funds. Plus, uncover the reasons behind underperformance in India's ETF market and the complexities of trading strategies.
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INSIGHT

ETF Market Size Comparison

  • US ETFs hold $10 trillion, while mutual funds have $30 trillion.
  • India's entire mutual fund market is worth $750 billion, with ETFs at $105 billion, mainly from EPFO.
INSIGHT

US Tax Arbitrage

  • US mutual funds face tax arbitrage, passing capital gains taxes to shareholders.
  • This contrasts with ETFs, which exchange stock for units, avoiding intermediate transaction taxes.
INSIGHT

ETF Mechanics

  • ETFs operate by exchanging stocks for units, not cash.
  • This structure avoids capital gains taxes, unlike mutual funds which buy and sell stocks directly.
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