I plan to invest in the Nasdaq 100 ETF. Do you suggest the ETF variant or FOF variant? I have a demat account. Which one is better with respect to liquidity, return and safety?
Both the ETF and Fund of Fund (FOF) variants of this fund are investment worthy. Typically, mutual fund investors prefer the FOF route because it saves them from the hassle of opening a trading and demat account. But since you already have a demat account, you can go ahead and invest in the ETF variant. In fact, that will save you from the additional expenses of an FOF.
Coming to your second question regarding returns, I would say that barring the slight difference due to the expense ratio of both the variants, they will be similar because the underlying portfolio is the same. As far as safety is concerned, these are equity investments and one should bear in mind that there is no guarantee of any kind. These investments can be fairly volatile through the ups and downs of the market. But hopefully, they should be rewarding over a long time frame.
Now coming to the liquidity bit, there is no concern in the case of the FOF variant because the AMC stands committed to honouring the redemptions at the applicable NAV on any given day. Even in the ETF variant of this fund, there are no big concerns on the liquidity front. This ETF is able to generate sufficient liquidity and trading volume on the stock exchange on a day-to-day basis. So for a retail investor, there should be no concerns in buying and selling the units of the ETF.