Index funds and ETFs: a simple comparison
Compare passive index funds and exchange-traded funds by access, costs, tracking and liquidity.
Index funds aim to track a chosen market index through a mutual fund structure. ETFs also track an index or basket but trade on an exchange during market hours, so investors need a demat and trading account in most cases. Review tracking difference, expense ratio, bid-ask spread, trading volume, premium or discount to indicative value, taxation and the practical cost of each route. Neither structure eliminates market risk or guarantees that the index will be matched exactly.
Eligibility
The account, KYC and product requirements depend on whether the investor uses a mutual-fund route or an exchange-traded route.
Potential benefits
Passive products can be transparent and cost-efficient, while ETFs may offer intraday dealing. The right choice depends on convenience, liquidity and total cost—not only the headline expense ratio.
How to apply
Read the product documents, confirm the benchmark and tracking record, compare all charges, and use an authorised mutual-fund or broker platform.