ETFs or Exchange Traded Funds are acquired by contacting a share broker or applying for them online. As they share the day- trade nature of stocks, ETFs can be picked up by veteran investors without having to make any changes to their existing portfolios or applying for a separate Demat account or trading account.

Yet unlike shares, ETFs do not require investors to pay a Securities Transaction Tax ( STT) and the short term capital gain on the ETF is automatically added to your income and taxes are levied based on your tax slab. Owning gold ETFs are much more tax efficient than actually, physically possessing gold, but with the value of the real deal.

However, first time investors would need to have opened a Demat account with their bank to buy and trade in ETFs.

Opening a Demat account A Demat account is used to transfer the physical shares one purchases in the market into electronic shares that can be accessed and tracked online making trading a simpler and more convenient venture.

All trade transactions will then be carried out through the Demat account and you can consolidate all your trading wealth and securities in one place.

First one needs to approach a Depository Participant or DP that is recognized and registered with the National Securities Depository Ltd ( NSDL) and the Central Securities Depository Ltd ( CDSL). These are firms and establishment such as ShareKhan, HDFC Securities, IIFL that deal with online trading.

One can then acquire a Demat account opening form from these DPs.

On filling the form, one has to submit it with photo copies of a verified address and identity proofs back to the DPs that will begin the necessary paperwork and procedures to finalize the account creation.

When the Demat account has been opened, one would have to produce your PAN ( Personal Account Number ) card to finalize the process and begin online trading.

A Demat account is not limited to trading in ETFs but can be used as your personal holding of all securities that are traded online.