ETF Investments – Investor Eligibility Criteria
Exchange Traded Funds or ETFs are very popular these days but did you know that these investment options have
actually been around since the 90s when they were first introduced as an innovative option, to investors who wanted
freedom from the burden of timing the market and stock picking? They offer investors broad exposure to stock markets
basis the index they track, on a real-time basis and at a lower cost than many other forms of investing. They are
transparent in their holdings and offer investors the advantage of liquidity. Other factors like experience exposure
to stocks without actually having to invest in them directly, have helped increase the popularity of ETFs among both
new and experienced investors.
Who is Eligible to Invest in ETFs?
The eligibility criteria for ETFs in not too different from that of
stocks or mutual funds. However, there are a few things to keep in mind if you do choose to start investing via this
option. Here’s what you will need to start investing in ETFs:
• A demat account:
A demat account is where ETF units are held. For an investor to be eligible to invest in ETFs they need to have an
active demat account.
• A trading account with a broker or sub-broker:
Because ETFs are traded on the stock exchange like shares, it is necessary for investors to also have a trading
account which can be opened through a broker/brokerage firm.
• KYC compliance:
KYC or Know Your Customer compliance is a procedure that all investors need to complete before they can start
investing. This procedure requires investors to furnish a set of documents that show proof of identification as well
as proof of address and bank details. Some of the documents that can be submitted for KYC compliance include:
Proof of identity – Passport, PAN Card, Driving License.
Proof of address – Passport, Utility Bills like electricity, telephone or gas.
Bank details – Cancelled Cheque, Bank Account Statement.
You can find the full list of KYC documents here.
Investing in ETFs as a Minor
If you are 18 years and above, you can open a demat account and start
in ETFs on your own. However, if you are under the age of 18, you would need your parents’ or legal guardian’s help to
invest in ETFs.
As per the SEBI (Securities and Exchange Board of India) guidelines, a demat account can be opened in the name of a
minor but will have to be operated by a parent or legal guardian until the minor completes 18 years of age.
The following guidelines also apply:
• A trading account can be opened in the name of a minor only for the sole purpose of sale of securities that the minor
has acquired through:
A gift or donation
Market transfers under implementation of Government / Regulatory Directions or Orders
• The account will be operated by a parent or legal guardian until the minor attains adulthood.
• The parent or legal guardian needs to be KYC compliant.
• The minor cannot enter into a contract with a broker in order to buy or sell ETF units.
• Once the minor has completed 18 years of age, he/she can take possession of their demat and trading accounts on
completion of the KYC compliance procedure.
• Following their acquisition of their accounts the young adult can start investing in ETFs on their own.
Points for Eligible Investors to Keep in Mind
While being eligible to invest in ETFs is the first step to getting started on your investment journey, there are a
few points to keep in mind to know if this is the right investment avenue for you:
• You should have at least a basic knowledge of how the stock markets work in order to invest in ETFS.
• Researching the various types of ETFs and understanding their pros and cons is necessary before you start
• ETFs are more suitable for you if you like to stay invested for at least 5 years or longer.
• It is important for you to be clear about your investment goals and risk appetite before you start investing. Risk
exposure of an ETF would depend on its stock profile; you need to be clear about the same and choose an ETF scheme
To be eligible to invest in ETFs, you need to be at least 18 years of age and KYC compliant. While these are the
basic criteria, it might also be prudent to have some knowledge of how stock markets work and how to pick a suitable
ETF scheme before you start investing.
An investor education initiative
Visit www.icicipruamc.com/note to know
more about the process to complete a
one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered
Mutual Funds, details of which can be verified on the SEBI website https://www.sebi.gov.in/intermediaries.html For any
queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations
Officers. Additionally, investors may also lodge complaints on https://scores.gov.in if they are unsatisfied with the resolutions given by
AMCs. SCORES portal facilitates you to lodge your complaint online with SEBI and subsequently view its status.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.