Read this right before investing in ETFs

ETFs, or exchange-traded funds, have made quite a name for themselves. (For the uninitiated, ETFs are a type of mutual funds that are listed and traded on the stock exchanges. Click here to learn more about them). Therefore, it's no surprise you plan to invest in them too. But before you do, let us warn you that the pricing dynamics of ETFs can be wild, even for seasoned investors. Let's understand why. Understanding the pricing disparities in ETFs ETFs, touted as a cost-effective alternative to traditional mutual funds, are designed to simply mimic an index, such as Nifty and Sensex. Yet, as it turns out, the world of ETFs isn't always as straightforward as it seems. That's because, every now and then, ETF trading prices sometimes exhibit significant deviations from their NAVs due to demand and supply in the market. And this difference can have a tangible impact on your returns. Let us show you how. Case study Let's consider the IDBI Gold ETF .